It’s hard to imagine a time when financial freedom and early retirement was not a dream. It’s even more difficult to imagine that you could actually achieve it.
But while it might seem like an impossible goal, there are plenty of ways to create a sustainable path towards early retirement. You just need to be patient, cost-conscious and willing to put in the work.
Here are some steps you can take today to create your own path towards financial freedom and early retirement:
Build passive income streams
Building passive income streams is a great way to start your journey towards financial freedom. Passive income comes from sources such as dividends and interest payments on investments, royalties and rent checks, etc.
Passive income helps you get out of debt faster by reducing your monthly expenses. It also gives you more time to focus on other areas of your life that don’t require you to work constantly just to pay the bills each month.
Invest in yourself and your future
Investing in yourself means investing in your education, skills, and experience — but don’t just stop there. Invest in your career, too. Read up on how to make the most of your professional career by looking for job openings at companies that offer opportunities for advancement within the company or with other employers outside of the company environment. By doing this, you can work toward being promoted or being offered a position at another company where you can grow your skill set again and increase your earning potential even more than before!
Get out of debt as quickly as possible
The longer you wait to pay off your debts, the more interest will accrue on them. The best way to pay off debt quickly is with a Debt Snowball strategy — essentially paying off all high-interest debt first (like credit cards), followed by low-interest loans (like student loans). Once those debts are paid off, then move onto long-term loans like car payments and mortgages (which tend to be lower interest rates). This method can reduce monthly payments by 50% or more
Create a spending plan (and stick to it).
This is the most important step in building wealth, and it’s one of the hardest. It involves creating a budget and sticking to it, even when you’re tempted by new purchases.
As with any other kind of budgeting, you can use the same tools as you would for any other financial goal: Mint or Personal Capital are good tools for tracking your income and expenses.
Set up automatic payments from your checking account so that your bills are paid on time without fail. If you put money into savings every month, you’ll have more than enough to cover emergencies.
Save as much as possible, even if it means spending less.
A big part of financial freedom is knowing how much money you need to save each month in order to make sure that nothing unexpected happens (like an unexpected car repair or medical bill). If you don’t want to stop spending altogether but want to build up some financial reserves so that you can take advantage of opportunities when they arise — whether those opportunities are investing in stocks or making a down payment on a house — then saving more is usually the way to go.
Buy a home, but don’t over-mortgage it.
If you’re just starting out and don’t have a lot of money to invest, buying a home is probably something you’ll want to consider.
But if you’re planning on retiring early, there’s one thing that should be at the top of your list: don’t buy a house you can’t afford to pay off.
A mortgage is supposed to be an investment for the future, so it makes sense that most people would want to put as much money down as possible when they get into a mortgage. But if you’re not careful, paying off your mortgage can be much harder than it needs to be.
Buy a small home instead of an apartment – This goes without saying but it bears repeating because it’s so important! If you’re living in an apartment (or even worse, a house that’s too big for your family), then chances are your expenses will far exceed the amount of income you bring home each month. That means that even if you had enough money left over after paying all of your bills every month and investing in other ways, there wouldn’t be anything left over at the end of the
Start an emergency fund (or two) if possible.
This is basically your safety net to pay for unexpected expenses like car repairs or medical bills. It’s also helpful if you’re planning for retirement, because it can help keep you from having to dip into savings prematurely in order to cover day-to-day living expenses.
You’ll want to start building an emergency fund. This is an account in which you keep money that’s not accessible to you or your family members. The goal is to have enough funds set aside so that if something unexpected happens, it won’t financially ruin you or anyone else in your family.
In the end, there are no silver bullets or shortcuts to financial freedom. There’s only a careful, cost-conscious analysis of all your expenses and investments, followed by a commitment to keep living a life free of debt. That’s not easy—it takes time, hard work, and discipline—but if you’re willing to do those things, you will be free of debt on your way to a secure financial future.
