The three basic steps for early retirement

2019-10-13 12:00:00

Early retirement - three basic steps!

The keys to being able to go into early retirement are three: Burn rate knowledge, putting the future you first, and strategic investing. Not that extreme...


1. A client of mine, a business owner, called me this summer and asked me this very question. I’m concerned about how much money I will have when I go into retirement, what do I do. Well, how much do you need every month to have the life that you seek when there’s no more regular income coming in? Was my question. You see, the first step is as simple as that: Get to know your burn rate. Alright, contact me if you need any help with that.

 

2. So step 2: putting the future you first. On payday every month you must set aside the right amount of money to be able to save up for the future you. The trick is simple: Mentally, put your money in three piles:

one pile is for the future you, let’s call it the foundation. This should be at least 10%.

next pile is for the debts that you might have. This should be about 20%.

and the third pile is for the rest, rent, food, travels, clothes, candy - you get it.

The take away here is that you come first, the first pile makes the foundation of what the future you will be able to spend when you’re not holding a job.

 

3. The third step in the keys for a smooth or early retirement is Strategic investing of the foundation. And here, to be honest, there are a number of ways to invest. So for most people we’re talking about long term investing, at least 15-20 years. 

You invest the foundation every month (the first pile, that we talked about last week). And here’s the trick: you’re not gonna spend it when you retire. The foundation is there to stay or hopefully even grow. But what comes from the investment or foundation, that’s yours to spend. To make it even simpler, the foundation is your apple tree and what it yields or returns to is the apples. You keep the apple tree forever, but yearly the tree will give you apples. And the apple tree might grow. 

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