For many people retiring early is a dream that they regularly dream of. Early retirement gives you the opportunity to travel to new places when you’re still young, meet new people, experience new cultures etc. Retiring by 40 is something that everyone wants, but only a few achieve this goal.
The reasons for failure in this area are many. But if you really want to retire early then you need to avoid making a few mistakes that we will be discussing in the following article. Not only the mistakes, but we’ll also talk about how you can avoid these pitfalls…
Mistake #1: Depending on Factors that You Don’t Control
In case your retirement plan only gives results or works if your investments earn you 8 percent a year, inflation stays under 4 percent, your health insurance costs don’t rise, and your home keeps on appreciating in value, then chances are that you may get into trouble. This is exactly why you should never rely on factors that are not in your control.
Avoiding this Mistake – Depend on your ability to adapt. Be more than willing to go that extra mile when it comes to adjusting your spending and tweaking your lifestyle in case the outside factors don’t work in your favor. Have some extra savings set aside instead of having the bare minimum. And yes, don’t forget to review your plan plus your income projections on annual basis so that you’re sure of the adjustments that you need to make.
Mistake #2: Spending More than Planned
It’s a common mistake that many early retirees make: spending too much money too soon and having no choice but to go back to work. However, you need to understand that spending more than planned is something like taking an “advance” on your salary. If not now, it will definitely catch up later.
Avoiding the Mistake – Go ahead and create a detailed budget plan before you hit early retirement. See to it that you don’t miss out on any of the “one time” expenses that happen to occur each and every year – things like medical expenses and auto repairs. It’s a good idea to create a sort of a retirement fund where you set aside a part of your monthly income into a different savings account that you can use for an unexpected expenses that may show up.
Mistake #3: Spending Carelessly
Having a ton of free time on hand is something we all want, which is why people aim for early retirement in the first place. But having extra time can definitely backfire because more time means chances are high that you end up spending money carelessly on things like traveling, shopping and home decorating.
Avoiding the Mistake: Plan out and be sure of what you would like to do when you retire. Make a list of things that you want to do, learn, see or simply experience. Writing all of these down will help you get things on paper. When the time comes, you could dedicated a few months or a year after you retire to each of these things you write down. The idea here is to find things that you are passionate about.
One of the most important things that you can do to make your early retirement dream come true is to focus on improving yourself now. For instance, if the organization that you work in right now conducts regular surveys using the 360 degree feedback system then you should already be getting a ton of feedback from the people you work with. Use this feedback to improve in areas where you lack so that it helps you with your early retirement goal.