The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy!
Early retirement is not just a craze. It’s a lifestyle and state of being that attracts many people who are either burnt out from working or just want to enjoy life to the fullest while considering work as an option and not a mandatory activity.
In order to retire early, it’s no secret that you need to start investing heavily early on. Compound interest and diversified assets will be your keys to achieving financial independence so you can retire way earlier than at age 65.
I always find it fascinating to read true stories about how certain people amassed enough wealth to be able to enjoy early retirement. At first, it sounded like an unrealistic fantasy and something that was out of my reach. But since I’m still in my 20s and I’ve learned how to adopt a frugal lifestyle and sacrifice the things I don’t truly want or need, I see early retirement being a real possibility for me and anyone else who wants to commit to the end goal.
As a result, here are 8 unconventional things you can do to help yourself retire early.
1. Save More than Half of Your Income
Saving 10%-20% is what most people will consider an acceptable savings rate if you want to live an average comfortable life. But since early retirement isn’t everyone’s average goal, you’ll need to take your savings rate to the extreme and in most cases save well over 50% of your income.
Of course the more you earn, the more significant your savings will be especially if you have a dual income household. A large part of your savings strategy should include investing not only in retirement accounts but in stocks and bonds so you can have a diversified portfolio.
In my opinion, your liquid savings should be kept at minimum and in a high-yield savings account. Depending on how stable your situation is, it would be best to carry anywhere from 6 months to 1 year’s worth of living expenses in your emergency fund.
2. Spend Absolutely Nothing on Clothes and Entertainment
In order to save 50%+ of your income, you’ll need to cut a few expenses temporarily or even permanently to free up more of your income to dedicate to your cause. Clothes and entertainment are the first spending categories I think of when considering which things to cut.
You probably have more clothes than you think when you go through your closet and consider everything you have. I was able to stop purchasing clothes for 8 months last year and just wear what I have. I saved so much during the time because I used to shop a lot.
With entertainment, consider it a fun challenge to see how long you can go without spending money on enjoyable outings and meetups with friends. I say ‘fun’ because you should still go out and have a social life. You’ll just need to search for free events, host some get togethers at your place, and get creative.
Take the savings you generate from having a $0 entertainment and clothing budget and invest it.
3. Sell Your Car and Invest the Money you Save Without It
Owning a car can cost you tens of thousands of dollars throughout your lifetime thanks to expenses like the price of the car, interest if you finance, repairs and maintenance, and more.
If you can get by in your neighborhood by walking, riding a bike, or using public transportation, you could save a ton of money that could be put toward your retirement goals. You can even use Uber to help fill in the gaps and score free rides by referring others to download the app and sign up.
4. Work a Side Hustle for Years
Having a low income can very well prevent you from being able to retire early. To combat this, consider asking for a raise at your current job, applying for a new position, or working a profitable side hustle. There are so many side hustle options out there and it basically just depends on what your skills are and what you like to do.
You can write, become a virtual assistant, do graphic design, sell items online, cater, give lessons, tutor, babysit and so on. Side hustles are often short-term since it’s challenging to managing a full-time job and a gig on the side. However, if you can manage your time properly and take care of yourself and your needs first, you may want to consider side hustling long-term so you can rack up a ton of extra cash.
5. Become a Minimalist
Becoming a minimalist is a great way to clear your mind and free yourself and your home from material possessions so you can become more appreciative of what you do have. It’s also a great way to save money and avoid lifestyle inflation.
If you keep buying more and more stuff, you’ll never retire early. With minimalism, you can sell all of the belongings you don’t want or need and enjoy a clutter-free lifestyle while focusing on what you do value in life.
6. Only Travel Domestically
Traveling is a must for some people, but it’s expensive. If you don’t want to wait to travel but still want to retire early, consider taking only budget domestic trips and taking advantage of travel hacks for the time being.
Only taking one small trip within the country each year is not a bad tradeoff if it still allows you to reach your goals. Then, you can save international travel for when you retire early.
7. Pay Yourself for Coffee Each Day
Whether you purchase coffee each morning or not, this is a great strategy to implement to help you set more money aside for the future. Since the average cup of coffee costs $4 or so, make your own at home, but still pay yourself each day in the amount the coffee costs at a cafe.
If you give yourself $4 each day, that’s $28 per week, $112 per month, or $1344 per year extra that you can save and invest.
8. Don’t Buy a House
Buying a house was the American Dream decades ago and still is today for some people. However, more and more adults are putting off this huge financial step in their lives in order to pursue other passions.
Depending on where you live, renting may not be considered as throwing away money if market rates are low. Plus, the average person spends hundreds of thousands of dollars financing their home and paying it off. Imagine if you could be enjoying that money in retirement instead.
Of course you’d need to be okay with denying the option of homeownership.
But how much is your goal of retiring early worth?
When planning for early retirement, it’s all about maximizing your investment contributions and deciding what you will give up now in order to enjoy financial freedom later.
How about you all? Have you ever thought about retiring early? What unconventional things could you do to make that a reality?
Share your experiences by commenting below!
***Photo courtesy of https://www.flickr.com/photos/jakerust/17160423251/in/
