Retire Early in Your 30s – Overview
Are you planning an early retirement? In this blog post, we will examine the financial habits you can build to retire in your 30s.
Take a step back and imagine your ideal retired life for a moment. Your dream house, the places you would like to travel to, your ideal car – all these aspects require careful planning while you are still working so that you can live the retirement you always dreamed of.
The good news is that it is entirely possible to retire in your 30s by building a few healthy financial habits that can sustain you through the golden years of your life. Let’s get started.
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1. Develop a Plan
Planning gives substance and form to your dreams. If you are seriously considering early retirement, it is crucial to have an idea of your financial situation and goals, your life expectancy, your lifestyle and living standards, and your contingency finances.
It puts you and your retirement goals on the same map, helping you chalk out the journey with better visibility.
2. Set a Budget
Before you jump to planning finances for your retired life, it helps to have an idea of your recurring expenses, desired savings, and other expenditures post-retirement. Plan for expenses like living and sustenance, recreation and travel, bills and healthcare, debts, and emergencies.
Try to arrive at a ballpark budget of monthly expenses from which you can work the math backward to your present age.
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3. Make Investments
Saving money from your salary alone isn’t sufficient as it does not help you create a corpus quickly. Consider the FIRE math: the minimum amount of money you need to live off after early retirement is 25 times your current earnings. If your withdrawal rate is expected to be 4% after retirement, a 25x saving would last you about 30 to 50 years.
Do some research on long-term investments (like mutual funds) that help you multiply your earnings by 25x by the time you retire.
For example, if you set away 20% of your earnings towards savings, consider putting 15% of this amount into long-term investments and keep 5% in your savings account. This is merely an example; you may consult a financial expert to provide you with figures suited better for you.
4. Generate Passive Income
Your passive income is the money you earn without working for it. A good example is owning rental properties. Passive income is an excellent method to funnel into sustenance requirements after retirement, provided it has the capability to cover for inflation. It frees up your savings to cover the lifestyle expenses post-retirement.
Other options that generate passive income are annuity plans, P2P lending, stock dividends, mutual funds, etc.
5. Line Up Your Insurance
Having all your insurance sorted out before retirement helps you lead a less worrisome older age. Consider setting up your life cover, health cover, car cover, etc., before you retire. If possible, try to acquire insurance independent of your employer so that the benefits continue even after you quit your job.
One of the most important aspects of walking into your early retirement stress-free is to eliminate all the bad debt as quickly as possible. Try to repay all your loans, and avoid borrowing from your retirement funds at all costs.
The second important tip is non-financial: keep yourself fit. Stay active and eat healthy so your retirement corpus is used for recreation rather than healthcare in the future.
Early Retirement is All About Making Smart Decisions
Whether you decide to retire in your 30s or to live to your full work potential into the 60s, retirement is all about making smart decisions. Saving up enough to sustain your lifestyle well into the future begins with making conscious choices today that converge and lead to a common goal in the future.
Build these 5 habits today to retire early in your mid-to late-thirties.