If you want to retire early, you must have a plan. Many people want to retire early, but unfortunately don’t plan keenly, or don’t even plan at all. This makes early retirement a dream. However, having a plan simply doesn’t guarantee early retirement. Such a plan must be good and right, and of course, must be followed.
Early retirement is all about financial security. If you can achieve financial security sooner, then you can retire earlier. Financial security is a state wherein you no longer worry about money or finances in whatever situation because you got yourself covered with all the support. However, the biggest question is how? What are the things that you must do in order to become financially secured? What are the things that you must consider in your financial plan for you to retire early and be financially free, secured, and independent in no time? Read on and find out.
1. Increase your cash flow. The first step that you must do is to increase your cash flow or to increase the amount of money that gets into your account. If you rely on a single source of income, you’re in danger and you must find another source the soonest possible time. The best time for you to find an extra income or another source of income is during your free time. The more money coming in and the more sources you have, the more stable your financial foundation is. Just in case one source fails to provide you an income, at least you still have more sources.
2. Manage and eliminate debt. If you have debt, manage it well and as much as possible, eliminate it quick. Debt grows in time because of interest and if its not managed well, it will create a trap for you. Make it a point to pay off your existing debt. If you have increased your cash flow, you can pay off your debt fast.
3. Create an emergency fund. An emergency fund is an amount of cash that is readily available in times of emergencies. If you have an emergency fund, you can avoid running into debt if the need arises. Have at least three months worth of your income in a savings or emergency fund account. The bigger the amount, the better.
4. Ensure proper protection. Proper protection means income protection. Just in case you will lose your income generating capacity either through death or permanent disability, at least you can still provide financial assistance to your family and loved ones through health care and life insurance plans. Health care plans will cover your health, medical, and hospital bills in case you get sick while life insurance will provide financial assistance to your loved ones in case you can no longer provide an income for them. However, some healthcare and life insurance policies have investment features in them that will also give you a good sum in case you aren’t able to use the plan within its tenure.
5. Build long-term assets and investments. Investments take time to grow, they don’t become big overnight. Investments and assets will provide you a very good source of income when you get old. If you want to retire not just early, but very comfortably, pour into investments. Invest in stocks, mutual funds, bonds, and other securities, and accumulate assets such as properties or starting a business. If you have many investments, all of which will contribute well to your retirement.
6. Preserving your estate. Preserving your estate means you’re making sure that your heirs will get everything that you own just in case you die or get disabled and will no longer be capable in signing documents. If you fail to prepare this one, it will cost those who are left behind a lot and worse, should they fail to pay, everything that you own will go to the government. Normally, estate tax is around 25 percent of your net worth so for example if you have a net worth of $1B but you failed to prepare on how to leave everything to your heirs, they will need at least $250M to claim your assets. Worse, they can’t touch your $1B in order to pay the $250M because your account will be frozen, hence they need to find it somewhere else. If you have preserved your estate well, you can retire well because you have the peace of mind.
These things are very easy to understand, but quite difficult to follow and apply. Make it a point to develop the habit of discipline in saving and following your plan so you’ll be successful and fully enjoy the benefits of your plan.