Choices, Give Up, and Changes to Make If Want to Retire Early? Change Your Thinking

If you hate your job, you are not alone. In survey after survey, a plurality of workers say that they dislike what they do. Most people would love to retire early, and I was lucky enough (and worked hard enough) to do this at 40. I am so very fortunate, blessed, but I also gave up so much…health, years of my life, etc. Even who knows, family ones as well. But you need to take several steps and change your approach to how you live your life and spend your money.

The latest Gallup survey shows about 65% of employees are not engaged or are “disengaged” at work, meaning they do the bare minimum at their jobs if that. They in effect want “out”. Other surveys show similar results in how many people are dissatisfied with their work and careers.

Even among those who are satisfied or engaged with their jobs, many workers dream of retiring early and enjoying the good life while they are still young and healthy. Or at the very least they want “freedom”.

Joining those happy early retirees may be your dream, but what are you doing to make that dream a reality? Early retirement does not just happen, and those who are successful have been planning (and more important “doing”) for a long time. In fact, I started planning and doing when I was a teenager! Even now I look back at this and I shocked that I did this and felt that way about retiring early at that age.

I still remember the day I first vocalized my goal to retire early…I was on vacation in Las Vegas and told the group I was traveling with that I wanted to retire by the time I was 40. And I was 25 at the time. That is the first, and really only time, I vocalized my goal (“dream”) to retire early. Quite frankly I thought my chances of retiring by 40 were “tiny” at best…but it was always a goal.

Some lucky people do win the lottery, but betting on a winning ticket will not get the job done. In fact gambling is normally a waste of money, and studies show too many low income people waste their money gambling/on the lotto.  So while you wait for the lottery gods to smile on you, here are some things you can do to maximize your investments, minimize your spending and boost your odds or an early exit from the workforce.

Look at Impulse Purchases from an Hours Worked Perspective

Many successful early retirees have used this strategy, and it is great for putting things in perspective. The next time you are looking at that must-have gadget or new pair of boots, take a step back and think about the hours of work that purchase represents.

If you earn $25 an hour, that $1,000 iPhone represents 40 hours of your hard labor, and that does not even account for taxes. When you look at things that way, those purchases can become a lot less attractive. Would you rather have a new gadget for that money (which will only lead to you wanted the next iphone in a year) or invest the $1000 and have the “money work for you”? This is the difference between retiring early and joining the consumer “rat race” of trying to keep up with the Joneses.

That does not mean you should not buy anything, or that you have to live like a pauper. What it does mean is that the spending you do is deliberative and well thought out and not mere impulse buys.

Increase Your Financial knowledge

If you want to retire early, you need to be good at numbers, math, and overall financial literacy. You need to understand the pros and cons of good vs. bad debt, understand how investments work, gain some knowledge about stocks and investments, know about living within your means, etc. Make your money work for you.

A big part of this I think is psychological, and you just need to sometimes (often?) say no to materialism and keeping up with the jones. Buying the newest and greatest thing is just a “rat race” you can’t win. Not to mention must people do it to “impress” people they don’t even know or care about, and who don’t care about them. Be a financial whiz to retire early, and find some of the basics to financial literacy.

FIRE – Financial Independence and Early Retirement

There is a movement called FIRE. It is very controversial, as many in the FIRE movement say you can retire with a million dollars or so….which I strongly disagree with as well as many other financial experts such as Suzie Orman. If you want to live on investments you need much more than a million, as that may only support an income of 30K per year.

Many experts say you need much more to retire early, and I say six million or so if you want to have any quality of life as well as long term financial security. It is an interesting topic to read about for those who would like to retire, and there are many articles on it including the blog post I have.

The reason I write this FIRE comment to show how (unfortunately) misguided so many people are…so many Americans think you can retire with hundreds of thousands of dollars which is unfortunately just not realistic. It is impossible to retire with that…unless you have something like a full pension which is very rare in today’s day and age. The fact is whether you need 8 million, 6 million, 3, 2, 1 or whatever, the fact is tens of thousands or hundreds of thousands will not do it. And unfortunately that is what Americans have saved for retirement….and that is in their 40s or 50s…20 to 30 year olds are on average of course much worse.

Discipline, Make Choices to Give Up some things and Hard Work

I am always shocked by how many people think things come easy, and they feel they are entitled to basically everything in life, including early retirement. That is entirely the wrong attitude to take if you want to be successful, much less retire early. It takes patience, hard work, and more. And of course luck, some of which you may make on your own. I made sacrifices left and right, and almost in effect gave up most of my 30s as I worked so hard and often, and I gave up so much. And maybe if I was not working so hard back then, just maybe I would have had pushed for a family/kids and had children. Who knows.

So many people in this world are entitled. They think they should have a better or higher paying job, without working for it. They think they can just start a successful business without working for it. They think they are entitled to have all this “stuff” and also retire early at the same time, without working for it. I know people who think they “know it all” about a business or finances when someone like me, an expert and one of the best (as shown from my results) could have helped them in many ways. I know people who complain non-stop about their jobs, as if they are entitled to any job when in fact employment in this country is the choice of both the employer and employee…no one is guaranteed a job and they can leave at anytime if they are unhappy.

I know people like this, and many studies also support this general level of entitlement. As I wrote about, I think everyone in my immediate circle is self-sufficient and has work from probably childhood, as i for one can’t stand that entitlement.

Pay Yourself First to Retire Early

The pay yourself first concept is a vital one to master if you ever want to retire, and the sooner you master it, the easier it will be to leave the workforce early. Think about paying yourself before you buy “stuff”.

Instead of saving and investing the money you have left at the end of the month, the pay yourself first strategy flips things on their head. With this concept, you pay yourself first, pulling a percentage off the top and removing it from what you have to spend.

By doing this, you force yourself to live on less than you make, a vital prerequisite to early retirement. Aim for a fixed percent rake-off to start, then ramp things up a percent or two every year. This may seem like a lofty goal, but it is one that successful early retirees have mastered. Read more on paying yourself first.

Be Consistent

If there is one thing that sets early retirees apart, it is their consistency. Those who managed to retire in their 50s and even their 40s started saving and investing early, and they kept at it year after year, no matter what was going on in the world – or the stock market. I retired when I was 40 and starting investing in the market when I was about 15, and was saving money even before then…maybe from around age 13 or so. It leads to compounding.

This consistency is a key underpinning of success, but it is also easy to implement. Setting up an automatic investment into your favorite mutual fund or Exchange Traded Fund, participating in the 401(k) plan at work and sending part of your direct deposit to a savings account will all get the job do

Successful early retirees also tend to keep their investments simple, gravitating to things like index funds and exchange traded funds that encompass the entire stock market. Or they research stocks extensively and the market, and they know everything about it and how it works to maybe give them an edge. In addition to their simplicity, these investments are very low cost, meaning more of your money goes right to work.

Avoid Bad Debt

Some debt, such as car loans or credit cards, are considered bad debt. A car is a depreciating asset, meaning it loses value over time. Borrowing money and going into debt to pay for a depreciating asset is a horrible investment. If you want to retire early, then stay away from it. Learn about good debt vs. bad debt.

Some debt can be a “good debt”, and that may be able to help you retire early if used smartly. One example may be a low cost mortgage to buy a home in an affordable (not over-priced) market. As the home may appreciate in value, which means you are using leverage to increase your wealth. This is a positive for retiring early.

Early retirement is a dream for many workers and a dream come true for a lucky few. Even if you do not retire in your 40s or 50s, you can use the examples of those early retirees to make yourself more successful. Early retirees have a number of things in common, from discipline and consistency to a unique outlook on life. Paying attention to their examples, changing your approach and how you think about it, and learning from their experience is a great way to make your own early exit from the workforce.

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