Saving is rad. The thing is, unless you actually put the money aside and SAVE it, your penny pinching ways don’t really add up to anything tangible. Since saving is the key to retiring early–or at the very least, on time, here’s a couple of strategies to catapult you to spending your days exactly how you want to a little sooner.
- Pay yourself first. This is a classic suggestion for building your emergency savings accounts, but it should also apply to retirement. Arrange for the money to be taken from your check before you ever even see it.
- Money saved on groceries, lowered utilities, gas, etc. should all be immediately funneled into accounts, otherwise, it gets spent.
- Don’t take any raises. Put all raises and bonuses into your retirement account. You won’t miss it if you never really had it.
- Check your retirement accounts for exorbitant or hidden fees. You don’t want to spend your hard earned capital contributing to market managers and financial advisers.
- Live simply and save the rest. I know that sounds obvious, but next time you want something that isn’t a need, take the money you would have spent and pay your retirement fund. Try that for a year, and I bet you’ll find that the money really adds up. Coffee, new boots, etc. all count.
- Buy used. I read an article {I can’t even remember which article, so I can’t give it credit} a while back that said to buy 80% of your clothing used, 20% new {I think it was referring to undies, etc.}, and save the difference. So, in theory, when you need a new pair of pants, you price them out new, buy them used and then immediately throw the difference into savings.
- Downsize. Downsizing your house naturally equates to downsizing your expenses. You will have less to maintain, less to heat and cool. You’ll need less furniture. Everything will be less. That means you will naturally have more income to SAVE.
- Plan on paying off your mortgage by retirement. One of the biggest attributes of early retirees is a debt-free life. They keep their monthly expenses minimal so that their retirement accounts don’t have to have millions–only enough to generate a set amount of yearly income via investment gains.
- Know how much you need to retire. Have you ever actually done the math and figured out how much you need to retire? How much will your fixed expenses be per month? Your financial adviser can help you come up with this number, but there are also plenty of free calculators available online. Once you know how much you need, you’ll have a tangible goal that you will be more motivated to work toward.
- Make the most of FREE money. If you’re lucky enough to have an employer that matches your contribution, don’t let it go to waste. If you found $3000 on the sidewalk, would you walk right past it? Heck no!
Any of you planning on retiring early? How will you make it happen?
~Mavis
SHARE:
Lori says
We were a little late getting in the smart game of saving for retirement and our main goal now is to get the mortgage paid off while building up our retirement. I was able to check off all 10 points you made, so we are on the right track, but we need to stay motivated and keep on keeping on.
Eileen says
We’re trying to. We pay extra towards the principal of our mortgage every month, no car payments, we avoid going into stores unless we absolutely have to. I shaved my head and let it grow it gray, (and i work at a hair salon. True story.)
Also,we each work a bit extra on the side. It still doesn’t seem as though it will ever be feasible, despite our efforts. We shall keep trying.
Crystal says
When you are barely able to pay for the basics with your paycheck, saving for retirement seems like some kind of fantasy land. I have a feeling that unless the economy picks up in some way that more people are able to actually support themselves/their families with their jobs, we are going to have a serious crisis as all of the people unable to save anything at all reach an age where they cannot work any longer.
Mavis says
I agree with you on that. Living paycheck to paycheck and barely covering the necessities is completely different than giving up that daily latte to save for retirement. Forced penny pinching is stressful and disheartening.
Amanda says
Crystal, have you heard of Dave Ramsey? He has really helped us to get past living paycheck to paycheck. Most importantly he gave us hope.
Rebecca W says
Really good advice, Mavis. I have employed many of these strategies (downsizing, paying off the mortgage, contributing every payday to my retirement account) and yet I still find it hard to retire early. The main reason is the cost of healthcare for early retirees. Medicare is unavailable until age 65, and then it doesn’t cover everything. My employer offers a healthcare plan for retirees, but for myself and spouse it would be $1500 a month! That’s not a typo, I really said per month. Maybe we should move to Canada???
Steph says
Yep. I was diagnosed with cancer a few years ago. No way I can afford health insurance if didn’t come from my employer. If medicare is gutted, I don’t know what many of us will do.
Marcia says
I have no plans to retire early, but I’m in a precarious industry. So you never know. I’ll be 46 this year, and it’s not easy to get hired in tech after 40, even worse after 50.
That said, my husband and I have always been frugal. If I lost my job, we’d be fine forever. If we both lost our jobs, we’d have to sell the house (in a high cost of living area), and move somewhere cheaper. But we could probably survive on our savings for a long time.
Sallie Borrink says
11. Hope you hit the genetic jackpot and don’t end up with expensive health problems that are not the result of poor lifestyle decisions.
Linda says
Amen sister!!!!
Sarah says
So much truth in number 7!! Our good friends live the same lifestyle except, their home is 2400 sq ft bigger than ours. Sure it looks fancier and flashier. However, a couple months ago at dinner we all compared bills etc. Once we averaged everything out our monthly bills were 1/4 of theirs. For example, we heat our house every other day- to keep it at 65. Their heater runs at a more constant rate. And that wasn’t even counting the extra furniture. It was all the little things that added up as well- their lawn service has 3x the lawn to mow, cleaning lady has 3x the house to clean, etc.
By having a small house (1400 sq ft)- this has allowed us to pay off our vehicles very quickly and have a substantial part of our mortgage paid off. More than anything- if either of us were to loose our job, our mortgage is low enough that covering it won’t be a huge stresser.
Sherry in Sumner says
Hi Mavis. These are all good strategies for retiring early and I followed most of them before I retired (early). But the most valuable guide I found was a little book called Your Money Or Your Life by Joe Dominguez and Vicki Robin. (the 2008 revised edition). I call it my bible and I only wish I had discovered it back in the ’90s when it first came out. I could even have retired earlier. They have a budget system that I follow to this day. I would encourage all your readers to read this jewel.
Stephanie says
Love that book, Sherry! I didn’t find it until 2009. It totally changed the way I looked at money and the world. Then, a couple of years ago, I found the Mr Money Mustache blog. Love the suggestions. HH and I now have a plan!
Jennifer says
Is the 2008 copy the best am finding newer revised ones. Would like to get the best one and not need more than one. lol Thanks
Sherry in Sumner says
Jennifer, I have not seen any revised editions of Your Money or Your Life later than the 2008 one. I looked on Amazon and could find nothing later. Even though the figures in the 2008 edition are irrelevant now, the basic premise of the book is still invaluable and I think the book is definitely worth reading. However, if there is a newer edition of this book written by Vicki Robin (Joe passed away), I would read that one.
Jennifer says
Thank you so much for replying. I mostly look for things on eBay and have seen several with 1992,1993&1998 ect dates. I was thinking maybe the newer the better too, more up to date info. Take care, Jennifer
Thelma says
you need to pay off your mortgage long before retirement and live within your means…also long before retirement..save, save save…it will cost you more than you know!!!!
Thelma says
So thankful i live in Canada and do not have to worry about my future health care