I don't think there's any working-class citizen out there who wouldn't want to
retire early seriously who wants to bust their backs
longer than they have to sadly retiring early doesn't mean you'll
be free from life expenses as you will still have bills to pay
these include electricity food transportation clothing medical
bills and the list goes on what this means is quite simple
even at retirement you still need to have a source
or multiple sources of income these streams of income will be your means of
taking care of yourself and enjoying the rest of your days
unfortunately your retirement won't plan itself it is up to you to do
that for you to enjoy your retirement there
are several steps you have to take well ahead of time so what are these
steps stay with me because in this video i will share with you the five steps you
must take to retire early and if you're new to the channel then
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don't know what retirement is allow me to explain retirement simply
means a person's withdrawal from his or her occupation or active
working life people who are retired usually have a
source or multiple sources of income which do not require them to actively
engage in work so let's get into the five steps that
you can use to expedite your path to retirement step
number one assess your current financial position
for you to plan an early retirement you need to assess your current financial
state there are several factors you need to
take into consideration which would help you to find the moves
you need to make to achieve your early retirement goals
these factors include your debts your savings and your financial commitments
let's see how these factors will affect your plans for early retirement
first are your debts if you're in debt then your plans of retiring early may
not be possible as you will have to continue to work to pay them off
this however depends on the amount of debt you owe you may find some debts
easy to offset while some others could prove difficult
multiple unpaid credits will affect your credit rating
which will make it difficult to access other forms of credit to have a
realistic chance of retiring early you need to clear off
all your existing debts failure to do so will mean more working hours
next are your savings you can assess your current financial situation without
taking into account your savings while the money saved itself cannot
guarantee your financial freedom during your retirement years
it can be used to invest in physical assets or stock
physical assets your savings can buy you include rental properties which can
offer you a method of receiving cash flow to help fund your retirement
finally there are your financial commitments a financial commitment
simply means a commitment to an expense or multiple expenses at a future date
the expense could be a major or minor one
generally it is a financial responsibility associated with your cost
of living some financial commitments are one-off
payments while others can be stretched over a long period
these commitments don't necessarily have to be business related
they could also be personal for one to plan an early retirement all of his or
her financial commitments both in the long
and short term must be considered to be comfortable in retirement these pledges
or responsibilities need to be taken care of by a stream of income for this
reason all financial commitments must be
factored into an individual's early retirement plan
a few examples of financial commitments include a financial commitment to a
supplier in a case where you send a supplier or
purchase order you have a commitment to pay on an agreed date in the future
there is also a financial commitment to lenders when a
lender or a bank approves your loan you have a financial commitment to pay
back an agreed date according to your contract finally there
are long-term responsibilities to family if for instance you and your partner
have a baby boy you would both be committed to raising him this will
involve feeding clothing medical care tuition etc this
is a very long term financial commitment step
number two set retirement goals this is the second
step you must take in your quest for early retirement
there are three things involved in setting your retirement goals
they are your desired retirement age the amount to be saved before retirement
and your desired retirement lifestyle let's look deeper at each of these
factors factor number one is your desired
retirement age most people retire when they get to the ages
of between 60 and 65 but if you plan to retire young
then you're probably targeting the age of 45 to 50.
setting a specific age bracket when you would like to retire will help guide you
in knowing what you must and must not do to achieve your goal
on time factor number two is the amount to be saved before retirement
surely you don't plan to retire with an empty bank account there needs to be a
substantial amount of money saved before you can even consider the idea of
retiring it is up to you to figure out how much
you will need to have stashed away before you call it quits
as i mentioned before having money saved doesn't necessarily guarantee financial
freedom money is just a tool used for exchanging
of goods and services it is also a tool to invest that being
said you need to set a saving target and meet it
the money saved can be used to invest buy a home of your own
and take care of other financial commitments in the future
factor number three is your desired retirement lifestyle
what kind of life do you want to live during your retirement years do you want
to live a simple low-key life or do you want to go on
expensive vacations every year after figuring out the kind
of lifestyle you want you need to ask yourself another important question
will your savings and earnings from your existing investments support the kind of
lifestyle you want during retirement if your answer is no then you need to
save more and invest in more streams of income
but if your answer is yes then you should be fine
without setting these goals you will have nothing to aim at and this
simply means you will most likely miss step number three
determine your investing requirements early retirement is just not possible
without profitable investments investments are usually meant to yield
profits over the long term and there is so many viable investments
one can have the main factor to consider when choosing your investment method
is whether these vehicles will yield you the returns that will support the
desired lifestyle you identified in step number two
for instance investing in bonds as your sole asset will give you steady but
rather underwhelming returns meaning your retirement nest egg likely
won't support much of a financially fruitful retirement
investing in stocks on the other hand which have a higher potential for future
growth will give you more options in your
retirement years ultimately the more money you will need in retirement
the more aggressive you will have to be in your investment decisions
after you know your investing requirement figure you need to ask
yourself if you want to achieve it using active or
passive investing active investments require you to be actively involved in
how the business is run this may not be the best choice for
someone who wants to retire early as being actively involved with work
automatically defeats the whole purpose let's say you're a baker who has worked
in a bakery from the ages of 25 to 45 and you manage to save and open up your
own bakery if you go to the bakery every day and keep an eye on how things are
run or still baking then you really aren't retired you're
just self-employed on the other hand if you go to the
bakery once every two weeks and do minor things like sign
checks then you can still assume the status of being retired
passive investments do not require your full attention before it yields you
income passive investments mainly require the
initial investment and work at the beginning stages
after that it pays you without the need to lift a finger
examples of passive investments include rental property peer-to-peer lending
stocks bonds etc if you really want to kick back with your feet up without a
worry in the world then passive investments are best for you
as they do not require much effort from your part
step number four identify your asset mix for investing
after you have grown your emergency fund set your goals determine how much they
would cost and are certain of how much risk you can
take the next step is to consider which securities to purchase
remember you have to choose the ones that will help you reach your goals in
the long term your asset allocation is your
portfolio's blend of stocks bonds and cash
and finding the right asset mix is very important if you want to achieve your
goal of early retirement unsurprisingly many financial advisors
are of the opinion that finding the perfect asset mix
is more important than even choosing great investments
thanks to a variety of online calculators and tools it is now easier
for an investor to determine their optimal
asset allocation the asset allocation that will work best for you at any given
point in your life will depend mainly on your time horizon
and your risk tolerance the time horizon is the estimated number
of months or years you will be required to invest
to reach a certain financial goal investors who have longer time horizons
are usually more comfortable taking on higher risk investments
this is because the investor can bear the slow economic cycles
and the expected market fluctuations on the flip side
an investor saving up for a teenager's college education
would be more comfortable with a lower risk investment due to a shorter
time horizon risk tolerance is an investor's willingness to lose a part or
all of his or her initial investment in exchange for better potential returns
an investor with a low risk tolerance will likely go for investments that will
preserve their original investment but this risk aversion may lead to
prolonging their working years or reducing their standard of living in
retirement step number five automate your
investments automated investing involves having a
fixed sum of money channeled from your salary
or bank account every month and invested into a predetermined allocation
a perfect example of this is contributions to retirement plans at
work if your employer withdraws money from
your paycheck each month and automatically invests into a 401k or
403 b then you have automated your investing
for you to have an early retirement then this is something you must consider
there are three major advantages that come with automating investing
first you can't spend the money when you automatically move money into your
investment account it means the temptation to spend the
money on something else has been defeated
next there are less conflicts when you automate your investing you also
automate your savings and that leaves limited room for
conflicts on how much you should spend or save finally there is no work
required it would take a little effort to set up
but not a lot once everything is put in place you can
relax and reap the benefits and there you have it five steps you
must take to retire early thanks for watching if you want to go
from the life you have to the life you deserve
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