Some people are not intended to retire even if they are over 60s or 70s. However, if you are considering early retirement at the mid-50s or even earlier, you should better start with making budget at the earlier days so as to have a good management of your money. Here are some tips which might be useful in this respect.
1. To live within your means.
Doing this will help you save enough money for payment of your living expenses and those necessary in case of emergencies. At average, your housing expense should be limited to thirty-five percent of your total income, and 15 percent of it should go only for your transportation costs. You had better carefully calculate your percentages by dividing your house payment by monthly income, and then make some necessary adjustments.
2. To begin with saving.
To set up a nest egg, you should learn to be a routine of paying yourself first. In this way, it could not only increase your personal savings, but also be much helpful for you to retire at a reasonable age. When you were unlucky to lose your job or suspend working for a few weeks because of unexpected illness, the money you have saved would still help you keep a normal life. It is strongly suggested that you should save 10 percent of your income each month at least.
3. To avoid extras.
Everyone knows that it would cost you a lot of extra money to go on expensive vacations; do unnecessary shopping and dine out regularly. At the same time the expenses of such kinds would be likely to put yourself in debt accumulation. Therefore, you should modify your previous spending habits and bring down some extras to minimum. You should remember that all your monthly extra expenses should not exceed 25 percent of you total income. In order to avoid overspending, you must have a clear mind of how much money you’re going to use for each extra expense every month. To this end, you are kindly advised to keep receipts recorded and then examine carefully your spending regularly to make certain that you are always remaining on target.
4. To eliminate debt.
If you own thousands of dollars on credit cards for mortgage or auto loan payment, it would delay your early retirement. If you want to avoid credit card debt, you had better pay off any of your new charge monthly. When buying a new home, you should persuade your lender to have a biweekly mortgage or a 15-year mortgage loan, both of which would assist you to pay down the mortgage balance more rapidly, resulting in spending less on mortgage interest.
5. To have a financial planner.
If you are offered a retirement account by your employer, like a 401K, you should better contribute a percentage of your income to make preparations for an early retirement. In addition, you should also take other retirement accounts and savings options into consideration, for example, open an individual retirement account or money market account. If possible you should have a financial planner to do this in a more professional way, thus getting his or her advice in regard to making budget, saving and investing as well as planning retirement.
Image source: vvinod’s blog