After reading enough books on retirement that I swear I could write one now, I’ve noticed a few common threads on early retirement. Not that these are rules per say, but rather some general guidelines.
- Start Early – With the wonder of compound interest working for you every year you start earlier the easier you will get to your goal. Vice versa if you are thirty and want to retire by 40 you’ve got to take some extreme measures.
- There is a Price to Pay – A high consumption lifestyle with all the latest upgrades doesn’t work well with early retirement unless you’ve made insanely large amounts of money during your working life. So for the rest of us something has to give. The good news is all that extra crap doesn’t mean people are more happy anyway.
- Don’ t Reach for a Calculator at the Start – Strangely enough jumping right into determining money is actually the worst thing you can do at the start since it can generate an overly large number. The first step should be to examine your life and find out what is making you happy and what isn’t working. Then by removing the excess you can put more funds towards your plan. Start saving, yes, but don’t panic on exactly how many dollars yet.
- Frugal is Your Friend – There is no shame on not spending money like everyone else. So don’t buy a new car if you don’t care about it. Do treat your money like a precious resource because it is one. It literally the very product of your time. So don’t waste time or money on things that don’t mean something to you.
- The Goal is Happiness, Not Early Retirement – Early retirement should be a logical extension of your life when you get there. It should be about freedom being worth more than things. It should be about loving your life and wanting more time for yourself. It shouldn’t be a release from misery. Otherwise you might find your dream will be poisoned by issues you should have dealt with decades ago.
So that’s my top five themes I’ve noticed. What do you think we should add to the list?
This post is now part of a carnival of personal finance.