Ever hoped to get out of the rate race and retire early? Ever wanted to travel the world? This is a goal that many desire, but few accomplish. How would you support yourself anyways? No matter how hard you might try, the “job” always seems to pull you back into its grasps, right? Is there a way to turn the tables on life and not have to trade your time for money anymore?
The key to having enough money to retire early is to increase your income and reduce your expenses. This may not be as hard as you might think. All it takes is some discipline, some desire, some planning, and a few tips.
1) Live Frugally
Live within your means–without chasing after stuff that will just end up in a garage sale. Make your won meals instead of eating out. You will be surprised at how much money you will have saved.
2) Reduce Your Expenses
Be conscious of your cash outflow. Track your expenses and compare them to a pre-thought out budget. You must commit to managing your expenses if retiring early is your goal. Do you really need the most expensive option for cable? Do you really need yet another pair of shoes?
3) Get Out of Debt
When you reduce your expenses, you will free up some cash for other things. Increase the payment on your credit cards with your extra cash flow. Start with the credit card with the highest interest rate. This will significantly reduce your cost of debt, and it is like earning your credit card’s interest rate on your own money, since you no longer have to pay them that interest.
4) Save For Your Retirement
Once you start repaying your highest interest rate credit cards, there will be an even bigger increase in excess monthly cash flow. Start putting that money into investments that can create additional cash flow. It is best to find investments that are scalable, so that you can add money to them at will, and have your next dollar earn the same return as the previous dollar. Make money your slave, don’t be a slave to money.
5) Invest In Your Retirement
Look for investments where you can take risk off the table fairly quickly, while making an attractive return. The main risk to control for is risk of loss of investment principle. As soon as you’ve removed your original investment principal from the investment, you’ve effectively taken risk off the table and your money in that account now growing for you practically risk free.
6) Have a Goal For Your Retirement Date
What the mind can conceive and believe, it can achieve. You main financial levers for getting there are amount of investment capital and the return on your investment. When planning, start at the end and work backwards, to calculate how much return you think you’ll need to get, and how much money you’ll need to start with. Once you know those two things, you can then start looking for ways to get access to that amount of capital and that target rate of return.
7) Control Your Retirement Expenses
If you have your house and cars paid off, you might not actually need all that much cash flow in order to retire. This is especially if you retire in a place like Costa Rica. You can live very well there, on a modest budget. The more passive income you’ve been able to create, the more places you can live, for whatever length of time you choose. This is financial freedom. By following the above plan you will be amazed at how much you passive income you can actually create.
By living on a modest budget, you will notice an reduction in your expenses and an increase in your monthly cash flow. Then use that extra money to rapidly lower your debt expenses. Always set aside an amount for investing. Plan your retirement goals by beginning with the end in mind. Stick to a living within your means and financial freedom leading to retiring early will become your reality.
Your financial independence will have a direct impact on your level of happiness. Debt causes unnecessary stress. It has been demonstrated that financially independent people are more generally happier than people in the same age group, but are not financially secure.
Some people may argue that money is the root of all the evil. That is not true. Love of money is the root of all evil. If you become a slave to money, and you try to buy happiness, then you will be hollow and unfulfilled. However, if money becomes your slave, and you utilize this resource for generosity, then you can do a lot of things to ease the burdens of others while still providing for yourself. It is generally understood that if you are financially free, then you will be less stressed and happier than those people in your age group who are not financially free.
Money cannot buy happiness. Money can only buy pleasure, but pleasure is not lasting happiness. Even so, financial security is very important. Many a person is scared of not having enough money to retire, and for many, that fear is well founded.
In the USA, people are more likely to stay awake at night worried their debt rather than Heart disease or diabetes. However, people who are financially free are not worried about such financial uncertainties. This is one reason why they are happier than others in their same age group.
You do not have to be a millionaire, or even a multi-millionaire, in order to be financially free. Financial freedom is when your passive income is greater than your living expenses. Your monthly passive income can come from a variety of investments, including stocks, bonds, life insurance products, gold, real estate, whatever residual income businesses opportunity you might own, or other more profitable investments. The measure of your financial freedom is the length of time you live comfortably if you stopped working today. One month, one year? If you can live for the rest of your life on the passive income generated by your investments, the you have achieved true financial independence.
Financial independence is financial freedom. If you would like to reduce your stress and boost your level of happiness in life, then create your plan to become financially free.
Are Your Financial Goals Clearly Defined?
What would be your answer? Many people would say “Yes”, but then cannot explain their goals in a sentence or two. Let’s take this to a different level. What if I were to ask you, “Do you have a clearly defined monthly, annual, and lifetime financial goals?”
Most people , in this case, would have to answer “No”. That is due to the fact that most people simply do not understand the importance of having monthly financial goals. Millionaires control 55% of the wealth of the United States. If you were to ask this question to them, most of the millionaire households would answer this question with a resounding “Yes”.
Wealthy people have clearly defined their financial goals, monthly, yearly, and lifetime financial goals. Remember, financial freedom will not happen by accident. Financial freedom will only happen if you plan it carefully, then execute your plan. One secret to becoming rich is simply having clearly defined financial goals.
Those who clearly define and write down their financial goals on paper or an Excel spreadsheet will become more wealthy than those who do not set any financial goals at all.
In order to become a financial success, it takes hard work and focus on how you will manage your money. If you want to achieve financial freedom, you must first learn how to manage your money well. You can only do that if you have clearly defined financial goals, written down.
Credit Cards of Millionaire Household Members
Here are the top 5 Credit Cards that millionaires love to own:
But I tell you, guess which credit cards millionaires in America prefer to own? Of course, you’re going to say that since they are millionaires, they will prefer the fancy cards: American Express Platinum, Diners Club, and Carte Blanche credit cards, right?
Not so. Most millionaires prefer simple, cheap credit cards because they are money savvy, just like the regular US household.
1st Choice: Visa
2nd Choice: Master Card
3rd Choice: Sears
4th Choice: J.C. Penney’s
5th Choice: American Express Gold
In reality, less than 5% of the millionaires in US actually prefer to use the high cost credit cards, the luxury credit cards, such as American Express Platinum and Diners Club.
The root of bad money habits is lack of financial education, financial intelligence. Poor and middle class people often think that rich people use luxurious credit cards, and they want to appear rich, so they themselves use those expensive, luxurious credit cards. When the parents have high income, but a low net worth, then it is likely that their children might develop bad financial spending habits as well.
Households with high income, but low net worth, are guilty of living beyond their means. This bad financial habit is often passed on to their children. They make up the upper middle class that never seems to be able to get beyond that.
High Income Low Net Worth
Most people with really nice cars and the nice house have high income, but low net worth. These people consider their incomes as wealth. This is the primary reason behind their continual financial struggle. Income statements and balance sheets are two separate things. It is dangerous to confuse the two.
Income is the salary you take home every month, plus income from investments, as interest, capital gains, dividends, business income, rental income, and so on and so forth. Net Worth, or wealth, is something that you accumulate over time, if you don’t live beyond your means. People with high annual incomes are not necessarily wealthy.
Let take 2 examples: Mr. Jones and Mr. Wilson. Mr. Jones earns $ 50,000 a year. Mr. Wilson earns $ 100,000 a year. Mr. Jones’ net worth is $1 million. Mr. Wilson’s net worth is $250,000.
You might ask this, “If Mr. Wilson makes twice as much as Mr. Jones, why does he have so much lower net worth? Why the difference in wealth? Even though Mr. Jones earns half as much as Mr. Wilson, his net worth is 4 times greater.
The reason is that Mr. Wilson’s lifestyle matches or exceeds his income. He has become a high income low net worth wannabe. He spends almost all of the money he earns, trying to appear rich. The government loves him, though, because to fuel his luxurious lifestyle, Mr. Wilson has to earn more income each year, and therefore has to pay almost twice as much in taxes than does Mr. Jones.
The people who achieve financial freedom are those who legally pay less in taxes and at the same time, accumulate more wealth. Wealth must be accumulated over time. Having income producing assets is the secret to becoming both rich and wealthy. That is the true road to financial freedom.
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