What on earth do I mean we intend to retire soon?
An early retirement goal? Good grief how is that even possible?
- Did we win the lottery? – nope, got to be in it to win it and we’re not
- Do we work as hedge fund managers? – sadly no
- Have we invented an app and sold it for millions? – I wouldn’t know where to start!
There are people out there who work hard and as a result money falls into their lap, giving them choices in how they live their lives and spend their money.
Then there are people like you and I who work hard but money doesn’t fall into our laps (unfortunately).
A small amount lands in our bank account each pay day and often just as quickly bounces out again by way of paying bills and basic living.
If you are like us and work hard every day, year in year out you may well think you will never be able to afford to retire, even when you reach retirement age. Let alone have an early retirement goal.
You may be deliberately avoiding the whole subject – and I don’t blame you!
These days there is so much written about retirement in the press; the ever changing UK state retirement age, the fact that people aren’t saving enough for their retirement, private pensions being worth less than ever.
And of course all those pensioners using the 2015 pension changes to cash in their pension early and buy a Lamborghini! We wish eh?
Can ordinary people retire early?
What can an ordinary hard working person do about retirement, about savings even? Someone who doesn’t earn six figures, who often doesn’t have two pennies (tuppence) to rub together, can’t just magic up a huge pot of money and retire early.
I’m no financial or IT geek, just an ordinary person earning an ordinary wage but I am doing something out of the ordinary by planning on retiring early.
But then I don’t think they are ordinary folk. Jacob was a nuclear astrophysicist (yikes) and MMM was a highly paid software engineer.
Your early retirement goal
Step 1 – Want it
Dream of early retirement, what it would mean to you, what it would involve for you.
- Think about what your early retirement might look like
- How might you use the free time you gain from not working
- What will it feel like to not have to work for money
- Would you volunteer, give back to your community in some way?
- What do you want early retirement to include? Travel? Holidays? Learning new stuff?
To move on to step 2 you need to have a feel for what you stand to gain from achieving early retirement because let’s be honest, it won’t be easy, not when you are only earning an ordinary wage.
Knowing what early retirement could mean to you, to feel it, taste it, will help you move towards it. The more real it is for you, the easier it will be to work towards it.
Step 2 – Create your goal
Set your early retirement goal.
Once you have your dream you need to create a goal to make it happen. Dreams don’t become reality without you taking active steps towards that goal.
Clearly defining what achieving that goal will look like helps you take the necessary steps to work towards it.
- When do you want to retire?
- What will you live on?
- How much money will you need to achieve this goal?
- How long have you given yourself, 10, 15, 20 years to achieve?
- What do you need to do to make this happen?
Don’t think you need a million pounds in the bank to retire early successfully – totally not true. However if you want to be living off £100k a year then yes you definitely will need that million pounds, and some.
It also helps to be a little bit realistic with setting your timing for achieving this goal. Let’s face it next year is not a great time-line if you haven’t started planning for it and don’t have a big chunk of money already in the bank!
Step 3 – Create action steps to achieve it
You now know what you want, when you want it and how much you think you need to achieve it. Now you need to look at what you need to do in order to move towards that early retirement goal.
Depending on where you are on your own financial journey you might need to:
- Track your current spending to understand how much you will need each year in retirement
- Identify ways to boost your income
- Identify ways to reduce your spending
- Start saving and investing (you will want to do research on these)
You too can retire my friend
How did we save enough money, what choices did we make to get here and can you do the same? The answer to the latter is of course you can do the same!
Of course you can do what we did, I know you can find ways to save money, indeed I bet you can find better ways of achieving your goals than we did once you get started.
Some of the things we did included:
- Paid our future selves first (save for tomorrow before spending today)
- Tracked our spending
- Slowly increased our income both in work and outside
- Made choices on what we spent our money and what we didn’t spend our money on
- Started a pension for Mr 2P which he can access at 55
I’ll share with you how we first started saving, what steps we took to increase those savings, what decisions we made and what you can do to make changes to achieve your financial goals.
I hope to be brave enough to also share with you ALL the mistakes we made and what we would do differently.
We didn’t have ‘tuppence to rub together’ when we first met and now we do. Many years weren’t easy but you do what you gotta do, you come through it and move on.
Achieving your dream
We are getting close to achieving our early retirement goal and to my surprise it’s a scary place to be! There are so many what ifs and buts as this new world moves ever closer.
Our dream has been like a shape shifter over the years, changing shape, morphing into a slightly different version of our dream as we worked towards it.
The dream was always there but what it looked like, when we were going to achieve it, how we were going to afford it have all changed over the past 12 years.
Your early retirement goal will inevitably change over time as you think, research and talk about it and as you do, it will grow clearer, become more real and change as you also change.
Start by taking these 3 simple steps to create your early retirement goal:
- Step 1 – Want it
- Step 2 – Create your goal
- Step 3 – Create action steps to achieve it