How to Retire Early! {15 Things You Need to Do Right Now}

A BIG Thank You to CreditRepair.com for sponsoring today’s post: How to Retire Early.

Ever since I graduated from college I’ve dreamed of how to retire early. Just imagine everything we could accomplish and all the fun we could have if we were able to retire early!

I realized that if I actually wanted to make an early retirement possible, I would need a good plan and unrelenting dedication to make it happen. So I started taking steps to make my early retirement dreams a reality. I’m not quite there yet, but I wanted to share with you 15 tips I’m personally using for How to Retire Early at 60 or younger!

If you’ve ever dreamed of retiring early, today is the day to start taking steps to make your early retirement dreams a reality!

Related: How to Start Saving for Retirement {10 Tips to Meet Your Goals}

How to Retire Early

#1: Write Down Your Optimal Lifestyle

It’s time to start dreaming about how wonderful your retired life is going to be. Start by making yourself a goal of how much you want to save for retirement.  Take into account the activities you’ll want to do, how much you want to travel, and how much you want to be able to give to family members.

Dream… and dream BIG about your future!  Identify what your long term goals are, then identify steps you need to take right now to help you get there.

Don’t forget to even think about your children’s children when you’re thinking about retirement.  Look beyond the ‘right now’ and think about leaving a legacy that can carry over to your kids and even your grandkids.

#2: Calculate What You’ll Need

So how much is your dream retirement going to really cost? Once you’ve determined what your dream retirement should look like, you’ll need to calculate just how much it’s going to cost.

Now is the time to add some estimated dollar amounts to your retirement dreams. You’ll want to calculate how much you’ll need for monthly living expenses, occasional big ticket items (new cars, large home repairs, etc.), health insurance, fun activities around town, travel, and charitable giving. Also, consider estimating how much you would ultimately like to give your family as an inheritance.

Then don’t forget about inflation. When calculating how much money you’ll need to retire well, you’ll want to account for price increases due to inflation. The average annual inflation rate in the U.S. is about 2.1%. I recommend using a free “future inflation calculator” online. This can help you estimate how much inflation will impact the amount you’ll need to save for retirement.

#3: Create a Budget… and Stick To It!

Your budget is the financial tool that will keep you on track for early retirement. Each month, it can help you stay financially accountable to your savings goals. So create a detailed monthly budget… and stick to it!  Avoid mindless spending and only spend what your budget allows.

A family that talks about money is a happier family!  So be sure to make time to talk about money and financial goals with your family so everyone can be on the same page.

When planning your monthly budget, don’t forget the power of saving and investing over time.  You are capable of achieving your financial dreams exponentially faster by consistently saving and investing.  One hundred dollars a month compounded by interest over many years is worth much more than one hundred dollars right now!  By starting early, maintaining a high savings rate, and investing your money… you can achieve your dreams of an early retirement so much faster.

#4: Spend Less Than You Make

The most effective way to supercharge your monthly savings is to always spend less money than you make. So make sure you never spend your entire paycheck.  If your earnings increase, save the increase instead of spending it.

Guard your savings goals carefully. Don’t let a new home purchase, a car upgrade, or even your annual vacation derail your retirement savings goals. Always strive to live below your means. If you make saving and investing money your top financial priority, don’t be surprised if you start reaching your financial goals early!!

#5: Create an Emergency Fund

Unexpected expenses have a way of derailing even the very best financial plans. So make sure you create an emergency fund to protect your retirement savings and early retirement plans. Your emergency fund will help you tackle unexpected expenses, and can be a lifesaver if you lose your job.  As a general rule, I recommend saving at least 3-6 months of your typical monthly expenses. For more emergency fund tips, check out my article Why You Should Start an Emergency Fund.

The unexpected is going to happen, so make sure you’re ready. Don’t risk letting unexpected expenses derail your future dreams of retiring early!

#6: Clean Up Your Credit

If you’re serious about retiring early, you need to supercharge your savings by finding as many ways to save money as possible.  One of the most overlooked opportunities for saving money is improving your credit. This can really help to unlock some new money saving possibilities. Having good credit can help you save money on your cell phone bill, car insurance, and score better interest rates on new loans.

To check up on your credit, I recommend reviewing your credit report regularly.  It’s actually really easy to get a copy of your credit report.  You can request a free copy from AnnualCreditReport.com each year.  When reviewing your credit report, check for any errors in your credit history or personal information.  Also check to see if there are any negative items being reported.

Did you find any problems or incorrect information on your credit report?  Don’t worry, this is common and there are some really helpful tools available from CreditRepair.com to help clean up your credit score!

They will help make sure items in your credit report are substantiated, relevant, accurate and reported fairly.  If items in your credit history are incorrect, they will work hard with you to get them corrected and to defend your financial reputation!  To learn more, go check out CreditRepair.com.

#7: Pay Off Your Mortgage

Don’t make the mistake of working hard to retire early, only to neglect paying off your home mortgage. Nothing will cramp your retirement lifestyle more than carrying a large mortgage payment over into your retirement. When you’re retired on a fixed income, you only have so much disposable income available to use towards the activities that will be the most rewarding. I’ve personally witnessed large mortgage payments swallowing up retiree’s disposable income, making other activities financially impossible.

You don’t want to risk letting a pesky mortgage payment spoil your dream vacation. And you really don’t want to let a mortgage payment keep you from flying to visit the grandkids out of state. So plan ahead, work hard, and get that home mortgage paid off before you retire!

#8: Pay Off Any Other Debt, and Stay Debt Free!

Having debt will seriously cramp your ability to save for retirement… or to even retire at all! So you really want to prioritize paying off all of your debt right now.  Are you ready to Snowball Your Debt? Start with the highest interest rate debt first and then work your way all the way down to paying off your home mortgage.

If you have high debt, consider getting a second job to help pay off your debt faster.  If you only have a little extra time each week, or you have kids at home, you can also try some of these Stay At Home Mom Side Job Ideas!

Once you’ve done all the work to get out of debt, don’t let up! You’ve worked so hard to get out of debt, so stay focused on staying out of debt.  One of the most effective ways to stay out of debt is to simply stick to your monthly budget and pay cash for most items.  When the cash runs out, you don’t spend anymore money for the rest of the month.  What about the credit cards? Well, those just may need to get cut up. Do whatever you need to do to say good-bye to that temptation once and for all!!

Related: How to Pay Off Debt Fast! {10 Easy Tricks}

#9: Start a Side Hustle

After you’ve finished paying off your debt, you may still want to hang onto that second job for awhile longer. A side hustle or a second job can be a great way to give your retirement savings a boost. A second job can be especially helpful if you’re unable to reach your monthly savings goals due to high monthly expenses.

Some ideas for a flexible second job can include:

• Meal Delivery
• Grocery Shopper
• Ride-Share Driver
• Wedding Photographer
• Tutoring
• Baby Sitting
• Pet Sitting
• Dog Walking

Related: 20 Retirement Extra Income Ideas

#10: Keep Driving Your Current Car

We all know that homes can be crazy expensive, but they also tend to appreciate in value. Homes also provide us with some valuable tax benefits. Cars are different. They can still be crazy expensive like a home, but they quickly lose value. Plus, new cars are getting more and more expensive every year.

The good news is that cars are lasting longer than ever before. So what if we simply decided to change our thinking about car ownership? What if we actually took advantage of our car lasting longer and drove it as long as possible? In most cases, the longer we drive our current car, the more money we can save!

The trick is to drive your car until the repair bills don’t make sense anymore. Or until you car simply isn’t reliable enough for what you require. Then, avoid the crazy new car depreciation. Instead, shop for a gently used car that has already depreciated for a few years. You can also try using some of my tips for how to Save Money on Your Next Car Purchase.

#11: Downsize Now

One of the easiest ways to lower your monthly expenses and to increase your savings is by living in a smaller, less expensive home. At first, the thought of letting go of your larger home once the kids move out might be hard. But there is one thing will make downsizing a lot more fun. Retiring sooner than you ever imagined was possible!!

If you are able to downsize into a less expensive home, you can apply the leftover proceeds from your more expensive home to your retirement savings. Getting rid of those empty rooms and unused space could literally add years to your retirement. While downsizing may not be financially beneficial in every situation, it often is one of the easiest ways to supercharge your retirement savings.

#12: Supercharge Your Retirement Savings!

Downsizing isn’t the only way to supercharge your retirement savings. When it comes to saving for retirement, you really want to save as much as possible. At a bare minimum, try to save at least 10 – 15% of your monthly income. Shoot for a higher rate of savings if you’re able to.

I recommend going through your monthly budget line by line to find even more ways to boost your savings rate. You’ll likely discover some overlooked money saving opportunities that have been just waiting to be discovered. You can use my tips for how to Save Money Fast to help identify some of the most commonly overlooked ways to save money.

#13: Put Your Money to Work For You

To make your retirement savings go as far as possible, check to see if your employer offers a match for your 401k. If your employer is generous enough to offer a 401k match, you just might want to take advantage of their generosity!

No 401k?  Be sure to still check with your employer to see if they offer any other retirement savings plans. If possible, also try to contribute the maximum amount to your IRA or Roth IRA each year. If you still have retirement funds leftover, consider investing these funds in a regular taxable account.

The rules for 401k and IRA retirement accounts can be complex, and even a little confusing. So be sure to take the time to call in the experts for advice before you make any retirement investing decisions. I recommend contacting either your licensed financial advisor or your CPA for advice.

#14: Make Frugal Friends

Find yourself a good financial role model, then compare yourself to them and not everyone else!  Those people you know that are driving around in a brand new luxury car and only wearing the most expensive designer labels… these are likely not the people you should be modeling your finances after!

Friends are important, and the right frugal friends will help inspire you to create the life you want! They can also encourage you to become a better you!!

#15: Live Like Your Retired… Now!

So now that you know how to supercharge your savings and investments to make an early retirement a reality, it’s time to start living like you’re retired… now! The best way to know if you can thrive on a fixed income while retired is to test drive living on a fixed income right now. Start by decreasing your spending and expenses, so they better reflect what your estimated retirement spending and expenses will be.

Next, if both you and your spouse are working, try living on just one of your paychecks.  Then save your entire second paycheck. If you only have one income, try living on just 60 – 70% of your total income. The remainder can be applied towards your retirement savings.

Finally, if you plan to retire in a different city or state, trying visiting that location for 1 – 2 weeks at a time. Also, make sure to visit at different times of the year. For example, if you’re dreaming of retiring in Phoenix… until you’ve spent a few hot summer weeks in the Arizona desert, it’s hard to know if you’ll be okay living with 4 months of 100+ degree heat.

Related: 101 Frugal Travel Tips and Best Kept Secrets

The last thing you want to do is to move to your dream destination… only to realize you don’t really like it! I’ve personally lived in a few different states and making cross-country moves is not for the faint of heart. So if you plan to make a move when you retire, take the time to make sure you really like where you’re headed!

If you want to know how to retire early, it really all starts with a dream.

Spending more time at the beach reading a good book… that thought motivates me every day to work hard and save for retirement. I also want to be able to leave my kids an inheritance and to help those around me in need. So what is it that motivates you to save for retirement? Find that motivation and use it to start making your early retirement dreams a reality today! You can do this!

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