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want to retire early ? in your 30’s or 40’s ?
how much money do you ideally need ?
before you retire , financial experts agree you need 25 times your annual expenses , invested for a long term in dividend stocks , bonds , index funds and other investment options like art,etc . For the exact breakup, please speak to your financial advisor . This is a variable factor , depends on the risk capacity of each person. this figure is based on an average inflation of 4 percent per year.
the first steps :
- reduce your expenses to barebones / minimum
- live in a smaller home ( lower payments, heating and cooling bills )
- have one car , instead of two
- save 50 % or more of your income and invest it in various instruments ( stock markets , bonds , fixed deposits , index funds – diversify to reduce the risk)
- track your expenses in an excel file / google docs spreadsheet , or a notepad on your phone or better yet , one of the software available like YNAB (ynab.com) , Perfios ( perfios.com) , personal capital ( personalcapital.com) or mint ( mint.com)
- instead of watching movies in movie theatres , buy a subscription for streaming services ( e.g. netflix , amazon prime video , zeetv , hotstar etc) for the cost of 3 – 4 movies and it will last the entire year
- learn to cook , eat meals at home
- if you buy 2 coffees a day , at 5 dollars per coffee , that is 10 dollars per working day – almost 220 dollars per month . Brew coffee at home, invest the rest in a coffee stock ( e.g Starbucks , symbol : SBUX ) . It has returned almost 200 percent returns in the last 5 years ( as of May 2 2020 )
- you don’t have to upgrade to a new phone every time a new one comes out , the old one will be good for at least 3 – 4 years
- avoid buying a car for as long as possible , use public transport , for places where there is no connectivity, use a cab like uber , lyft , ola , didi etc.
- when buying groceries , always go with a list
- don’t shop on an empty stomach
- the items in grocery stories at eye level are always more expensive than the ones at higher or lower levels
- buy the generic store brands instead of special brands
- items on the shelf are arranged so that the ones in the front have the earliest expiry date .. so go for the ones that are the back.
- always compare the savings in terms of percentages , not the actual amount mentioned.
- separate the needs from the wants
- try not to be an impulsive buyer – stay away from candy at the check out counter.
- on the income side , have a side hustle that earns you some extra bucks – eg if you are good at search engine or social media marketing , offer your services to the local businesses – over sites like upwork.com or fiverr.com
- when your car is not being driven by you , you can rent it out over turo.com or zipcar.com
- you can rent out your extra rooms to people over airbnb.com
- if you like babysitting , you can do that
- for pets babysitting , you can do it over rover.com – dogs and cats
- for these extra gigs , you can setup a company – LLC – a limited liability company and make sure you do proper accounting for it – hire a specialist on an hourly basis , they are cheaper.
- keep investing this extra money from side gigs into the stock market – index funds , if you don’t know which stock to pick
- you can learn trading in stocks , options , commodities , currencies and make money on the side ( you will need training for this , a brokerage account and some cash to trade with ).
- make sure you have adequate health , life , auto and home insurance
- make sure to compare the rates on a comparison website from various vendors
- just to be on the safe side , have an umbrella policy to cover the extra expenses
- read the fine print , are floods , earthquakes and other acts of god covered in the policies ?
- have a passive stream of income – maybe a business, some real estate homes or units that you can rent out , royalties from music , a website where advertising pays the bills and you develop a blog or content that people visit regularly