Retiring early is everyone’s dream. Not having to work and enjoy life to its fullest is what financial independence retire early (FIRE) is all about. Even if you do not plan on retiring by the age of 30, putting aside funds early in life and planning for retirement will set you on the right path and this guide will run you through a few suggestions.
Thinking about retirement
Retirement is boring to talk about. No one enjoys the topic of growing old, pension funds, retirement, and finding out you have grey hair. Unfortunately, it’s the way of life, but that doesn’t mean you’ll simply stop enjoying each day once you hit that magical age that allows you to cease working.
Really, many people enjoy retirement more so than the years in a 9 to 5 job. You can get more freedom to go to places you never could, to do the things you didn’t previously have time for. Retirement can allow you to truly enjoy life if you have finances in order.
Before you consider retirement, it’s important to make sure you’re in a good shape right now, today. I’ve compiled a list of things you can do to achieve this.
Clear credit debt
Clearing credit debt may seem obvious, but it’s amazing just how often it’s overlooked. Like overdrafts, it’s easy to fall into the trap of viewing both means as an addition to your available wealth, which is simply not true.
It’s good to see banks update their systems to not include overdrafts under “available balance,” but still people view them as such. Having debt of any kind with interest charges is not good for saving money. You cannot begin to invest or save if you’re having to pay fees on a monthly basis.
Should you find yourself drowning in debt, I’ve written up a short guide on how to get your debt under control. It’s simple and effective. Owing no money is a great step in becoming financially independent, as well as less stressed.
Cut back on expenses
Adhering to FIRE and working out an aggressive savings plan doesn’t mean you can’t treat yourself each month. Do you really enjoy having a fast vehicle? Taking out one on finance is perfectly acceptable, so long as you manage all other expenditures.
It’s best to pick one or two things to spend money on each month that you’ll get the most out of. This could be two holidays each year or even a hobby like collecting Pokémon cards. Also, consider switching energy tariffs or suppliers to get the best deal. Seriously. This can save you literally hundreds each year.
Review what you spend each month on groceries, bills, services, and more. Try and shop in advance for the month ahead and only go out to the store on a weekly basis for fresh fruit, milk, and other products that have a shorter shelf life.
Max out your pension
If your employment contract includes a pension plan with employer contributions, you’ll want to ensure you’re paying out as much as possible. Some employers will max your contributions up to a certain amount, so be sure to reach out for details on your current pension status.
If you don’t have a pension through work (or are self-employed), I strongly recommend setting up a private plan and put some money away each month. Pensions are never a fun topic, but they’re extremely valuable, especially if things don’t quite work out the way you imagined.
While a pension isn’t required for retirement, it’s great to have funds locked away that you cannot touch. Come the time when these funds are unlocked, you could invest a sizeable chunk should your finances already be in order, which would provide additional passive income, should you purchase dividend-paying shares.
Your personal goals
What do you want to achieve in life? Where would you want to be in 20 year’s time? These are the sorts of questions you should be asking yourself in the mirror (or not, your choice). When you hit retirement, your life isn’t over. In fact, for many, it’s only just the beginning.
Read some books, research online, and talk to those close to you about what you want to look back on later in life and feel some form of accomplishment. It could be a dream home, a holiday of a lifetime, or simply offer the next generation in your family a head start.
You’re likely not going to retire by the time you’re 40. I know for certain I’m not. FIRE isn’t some exclusive club for multi-millionaires, but more a philosophy anyone can live by. Once your finances are in a good place and you’re meeting my checklist above, it’s time to look to dividend investing.