Pinpoint the Target Amount of Savings You Need for an Early Retirement
You’ve probably heard about this tip a thousand times before, but there’s a reason it sits at the top of every advice blog you’ll come across- it’s crucial to know how much money you’ll need during retirement.
There’s no magic number that we can give you, and the only way you’ll be able to come up with a figure that fits your lifestyle is if you crunch the numbers. When do you plan on retiring? How long do you think your retirement will last?
By starting there, you can now deduce your expenses, and make sure to extract expenses that you have today that may not be there tomorrow, such as needing more money for gas if you have a long commute to work, or having to buy a new professional wardrobe every once in a while for the office.
By figuring out your current expenses now, you can add or subtract future expenses- add things such as medical expenses for when you’re older, but subtract hobbies you may not be able to engage in like rock climbing, etc.
This will become the skeleton of your retirement plan, and with the help of the following tips, you can start figuring out the details.
Understand Why You Want to Retire — What Do You Want to Do?
Many people who want to retire early actually do it just for the sake of retiring early. But you can’t leave things to chance once you reach a certain age, so figuring out why you want to retire early is important.
What do you plan on doing with all your free time? If it’s to spend more time with family, as long as this is an affordable option (by not having to pay to travel, etc), then you probably don’t need to set aside too much money. But if you want to engage in all the hobbies you haven’t had time for, you have to account for those extra expenses.
Or do you just want to finally leave your job? That may be the case for some people. Ask yourself what changes can you make first before taking a huge leap like early retirement. You could find a new job, switch departments, start freelancing instead before you retire.
By understanding why you want to retire, you’ll have an easier time planning ahead.