How does it feel to be retired at 45?
For some, it is just a dream but this is the reality that my husband and I are living in (I actually retired earlier than him because I became a stay at home wife right after we got married).
Of course, this is not easy. It takes a lot of planning and a change in lifestyle to make things work. I am just a freeloader to my husband’s good forward planning so I cannot share with you the steps on how to retire at 45 but I would like to share some tips on how to live frugally – these you can use whether you are retired or not.
1. Don’t spend more than what you earn.
You don’t have to be a rocket scientist to understand this simple statement, common sense will do. Your expenses should not exceed your income, otherwise you will be incurring debt or will use up your savings to cover the difference.
2. Pay your credit card bills in full every time.
Many people have a problem with the previous tip because of credit cards. By not carrying over balances on your credit cards to the next period, you do not only avoid interest charges, you will be obliged to stick to your budget and spend only within your means.
3. Conserve energy.
By doing simple steps like turning off the lights and appliances that you do not use, you are helping the environment and your wallet.
4. Be wary of coupons.
Using coupons is a great way to save but only if you really use those items that you intend to buy. Buying nothing is better than buying a discounted item that you do not need at all.
5. Do comparison shopping.
We are at the information age right now, take advantage of the internet and the vast amount of information that it offers. For example, if you are looking for the best gas and electricity deal, you can you can visit sites such as the Energy Helpline which provides independent price comparison service to its customers.
6. Plan ahead.
Have both long-term and short-term plans; the former will be your target destination while the latter are the twists and turns that you take to help you get there.
An ideal amount will be at least 20% of your income. Just make sure you pay existing debts (especially those that charge interest) first. You can use your savings for your emergency fund and for doing the next item in this list. Be aware of the high cost of not saving.
Passive income are those income that you will receive whether you work or not such as rental income, interest income and other investment income. This plan of action needs some knowledge (and sometimes skills) but it’s a sure way to financial freedom. Educate yourself on how to invest.
9. Stick to the essentials.
Media influence us to think that the best life is having the latest gadgets, wearing branded clothes, living in the grandest of home and driving the top-of-the-line car. Don’t be swayed. I would prefer having a $25 pre-paid phone and driving a second-hand minivan, 2000 model if it means extra money for necessities like insurance and our children’s college education.
Retiring young is achievable. You just need to plan ahead and live frugally.