My underlying purpose of starting this blog is to document my journey on my way to retiring early. I am not sure if everyone out there really has a dream or desire to get out of the rat race early, if at all. It's not necessarily a noble goal and I don't really try to push it on anyone. Some people really like their career, and other people don't mind working. Others genuinely enjoy having a nice house, big car and lots of stuff and are willing to work for it. I don't think any of these traits are negatives. I simply don't share them. If you share my desire to retire young and spend more time relaxing and less working than follow along as I share my list of five steps to take if you want to retire early.
My personal journey started last year at 28 years old. I have a goal to be financially independent by 40 years old. That makes my journey 12 years long. I'm going to put a road map together for others who have such a goal.
1. Save At Least 50%
Saving money is always my number one priority when it comes to plotting out my early retirement plan. If you can manage to cut expenses and maximize your savings to the point of saving 50% of your net income the odds are pretty good that you'll be able to retire young. Let's say you net $40,000/year. That means you are saving at least $20,000 of your total net income. If you manage to earn 8% annually on your $20K contribution you'll end up with a portfolio value of $403,000 after 12 years. That's a basic calculation, not factoring in inflation or taxes..but also not factoring in rising contributions. At a 5% yield, that kind of portfolio would be throwing off a little north of $20,000 a year. This would meet your expenses based on these calculations. Living on a fraction of your income not only maximizes your investment potential, but also puts you into a situation where you need less capital to live on. It's a win-win!
2. Invest Regularly
Some investors classify themselves as traders and look at charts, fundamentals, trading ranges..etc. I don't really bother with this stuff. I espouse regular monthly investing through a dollar-cost-average strategy. That means setting aside a certain percentage of your income or a fixed dollar amount and investing through high and low markets. This prevents you from sitting on too much cash and not earning anything on your money. If you listen to all the financial noise awaiting the next doomsday scenario you'll never invest a dollar. Skip the doomsayers and start investing for your future. I try to have a watchlist of 50 or so stocks that includes my portfolio. Every month I invest in what I think is the most attractively valued business at that time.