Are you the live-to-work kind of person, energized by your career and driven to climb the ladder? Or are you more of the work-to-live type who wants to succeed at your job, but not at the expense of enjoying life?
If you’re the latter, you’ve probably given some thought to what it would take to retire ahead of the average retirement age of 62, according to MassMutual. Whether you want to set your future self up with more time to travel, volunteer, or be with family, achieving an early retirement can be a blessing — but it’s not without some sacrifices.
I’m no financial advisor, so I can’t tell you exactly what budgeting steps to take to clock out for the last time before your first gray hair arrives. But here are some tips everyone should follow, especially if you want to leave the workforce early.
1. Live within your means and prioritize saving
It’s certainly appealing to spend your money today rather than put it away for the future. After all, you work hard, right? And tomorrow isn’t guaranteed. Why not enjoy today while it’s here?
Well, no matter how bleak the news seems these days, history shows us that tomorrow always comes. And future-you will be pretty miffed if you don’t leave them anything to live off of. That’s why it’s important to keep your spending reasonable for your income.
While it’s easy to charge up a credit card with money you don’t have, that will cost you a lot more in interest over time. Instead, keep your spending in check and put some money into a high-yield savings account every month so your nest egg will grow over time.
2. Invest in a brokerage or retirement account
One of the easiest steps you can take toward early retirement is setting up an account that lets your money earn money for you. Investing in a brokerage account or individual retirement account (IRA) can let you do just that.
Over the past 50 years, the average annual stock market return has been 10%. That accounts for both good years and bad years. If you’re in your early 20s (congrats on not having back pain yet) and put $10,000 into an investment account, it could be worth over $73,000 in 20 years. And that’s assuming you don’t add any more to the account over that time, which I know you’ll do with all the savings from following tip No.1.
3. Enjoy yourself!
I’m not a monster! Life is meant to be lived, so you should be out there doing just that. Buy that ice cream sundae! Take that weekend trip with your friends! Treat yourself to that massage!
While the first two points are higher on this list for a reason, you don’t want to lean too far in the other direction and live a bland existence for years just so you can let loose eventually. If you focus solely on the future, you’ll miss out on a whole lot of life right now.
It’s about balance
If we’re lucky, we get to play this game for a long time…but we only get to play it once. You need to make sure you’re taking care of yourself both today and years from now.
If you haven’t already, take some time to make a financial plan. Hopefully, you can carve out a little extra money now that can compound and grow over the years, allowing you to retire earlier than the average. But make sure that budget accounts for life’s pleasures today, too.
