5/20/2014 3:00 PM ET|
5 essential habits of early retirees
Adopting these strategies could allow you to retire years ahead of schedule.
The idea of retiring early can seem so far-fetched you've never considered trying to get there. Still, this select group of people is worth emulating in many ways, even if kicking back early isn’t on your radar. Here are a few traits of early retirees you should consider adopting:
They save a lot
There are an exceptionally lucky few who inherit their wealth, but the vast majority of early retirees spend years saving to increase their stash, plugging away towards their goal until they've saved enough to buy their freedom.
While you may not care to retire before everybody else, having a big cushion can give you the necessary ammo to take significant risks that can pay off big time. Perhaps it's a new job opportunity with a better career path that requires a short-term pay cut, or taking time off to obtain additional certifications to significantly lift your salary trajectory for the rest of your life. Whatever it is you want to do, having the comfort of not running out of money as soon as the paycheck stops offers choices.
They understand their spending habits
Talk to enough people who are financially independent and you'll realize they have a pretty firm grasp of how much they spend. After all, how could anyone who's not a billionaire know they can afford their lifestyle indefinitely unless they know how much they are spending? Yet, how many people know where their money is going? The good news is that once you start tracking your expenses, you are likely to find many areas to cut spending without affecting your quality of life.
They have an investment plan
No one is going to live off their savings for 40 to 50 years with all their money hidden under a mattress because inflation is relentlessly chipping away at their wealth. While not every early retiree is an expert in finance, they've all had to come up with a way to finance their lifestyle using their portfolio as the primary source of funds and deal with market volatility along the way.
- Also on U.S. News & World Report: 9 important ages for retirement planning
By learning about investing, you'll be able to increase your wealth much faster than if you just stick everything in a savings account thinking that's the safest place to put your money.
They pursue happiness instead of more income
It's obvious that quitting the rat race early is leaving salary on the table, but that's fine with those who retire early because they value freedom much more than a higher account balance.
Unfortunately, many people in our consumer society do just the opposite, slaving away for long hours while sacrificing their health, family ties and happiness. The new smartphones sure are nice, but are they more important than all the other things you could be doing with your time?
- Also on U.S. News & World Report: 10 places to buy a retirement home for less than $150,000
They are optimistic
With the heavy reliance on investment returns to sustain a long retirement, you have to put quite a bit of faith in the stock market to leave your job. Early retirees are willing to make the leap, while pessimists who fear running out of money might work longer in order to save more and shorten the period of retirement they need to finance. But the power of optimism goes way beyond expecting lucrative investment returns. A positive attitude will help motivate you, which can lead to better opportunities, more promotions and ultimately a better retirement.
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... the vast majority of early retirees spend years saving to increase their stash, plugging away towards their goal until they've saved enough to buy their freedom...
True, years of step - by - very small step planning, learning and action. My piece of mind in having the control and choice is priceless and I'm doing everything in my power to deliver that gift of freedom to me. Some say a home is the largest purchase the average person will make in their lifetime. I disagree, freedom will be, by far, my largest purchase.
I didn't save a lot before my wife went back to teaching once our kids were well into school.
We pursue happiness instead of wealth, AND we've always marched to a different drummer. We never followed the crowd or the latest trends! You aren't what you drive, and our kids got their educations at local schools- not name brand graduating without debt, and both are successfull - one is a college professor and the other is an IT professional.
We did have a plan and I retired at 54! We use our investment earnings for fun and extraordinary expenses and live on 2 modest pensions and her SS! (Just applied for mine @ 62). We're going around the world in Sepember-October of this year so I'd say we're doing all right!
Best advice is ignore the hype and our materialistic society and do it your own way!
The writer hit on an important point. First of all, pursue happiness!
You can do and enjoy many things without spending money.
The outdoors are free (or close) and healthy for you.
Second don't be crowd following sheep!
Paid off the mortgage, don't charge up credit cards, drive paid off cars.
Not trying to be the Kardashians.
Guess what! All of a sudden there is money to live a simpler, healthier, happier life.
I did it starting at 52.
Conventional wisdom lame stream media crowd following instincts never got me anywhere.
Live the life you love, love the life your living.
The article hits on important points. Living a smart-frugal and balanced lifestyle, that is being frugal but not feeling like you are living a deprived life so that you can invest the savings is the fastest way to retire early. I never defined my happiness with stuff so it wasn’t a big deal not to have the latest and greatest gadget. I retired at age 51 from a Telecom career. Financial freedom is worth everything it took to get here.
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