Most people dream of making millions of money and numerous investments and then going into retirement. Is it possible to retire in your 30’s or do you have to wait till you are in your 70’s or 80’s. Some people are forced to retire but they fight back with court cases.
For you to retire earlier, you must be prepared to make drastic lifestyle changes. This is the only way to achieve your hard-to-reach saving and investment goals. You should also accelerate the rate of debt repayments.
If you completed your college education recently, there is a likelihood that you are still repaying your loans. Of course you can’t retire earlier when you have loans from the High Education Loans Board (HELB) to repay.
I have interacted with people who are retiring before they reach 30. They have confided in me that repaying your debts is key to earlier retirement. After paying the debts, you become free to increase your savings.
If you are pursuing earlier retirement, there are things that you should do or not do. Below is a list of factors that may be holding you back from achieving this goal.
1. Living Beyond Your Means
Spending more than what you earn becomes a great obstacle in your savings plan. If you are pursuing earlier retirement, consider scaling down on your luxuries. Instead save more every month. Cut out on annual vacation, practice cooking at home instead of eating out at the restaurant and finally reduce on self-care spending. This means that you should not go for the most expensive clothing or housing in town. Changing your social live will allow you to achieve your saving goals. Do not misunderstand me, I do not mean that you avoid seeing your friends, just avoid the expensive places in favor of cheap ones.
2. Making Minimum payments on your debt
I guess most people prefer paying the least amount acceptable in loan repayments. Debt is considered to be one of the biggest obstacle to earlier retirement. This is because paying off debt demands that you forgo a large portion of your income. For instance, if you are paying the minimum amount possible, there is a likelihood that you are not even paying of the full monthly interest.
Just try to stay on top of your retirement plans by repaying loans quickly. Pay huge sums towards repayments of debt every month. At the beginning this will slow down your savings but later more money will be freed for investments.
3. Maintaining a high cost of living in posh suburbs.
Financial experts have always struggled with the idea of living in posh parts of town and earlier retirement. I know it is possible to achieve earlier retirement despite staying in expensive neighborhoods such as Karen in Nairobi, Munyonyo in Kampala, TriBeca in New York or Sandhurst in Jobur’g. Most people who stay in posh areas argue that their location makes it easier to connect with other well to do people. It is also obvious that to sustain lifestyle in these areas you need a higher budget.
A majority of people chasing earlier retirement move out of the big cities and settle in areas where they can purchases a home and pay off the price quickly. That way they avoid paying expensive rents in the posh estates.
4. Lack of a side hustle
If you are complaining that you do not make enough money, then make more. This may be confusing and at times impossible. Despite that, if you need an earlier retirement then getting a side hustle is not an option. There are many options available. Some people sell cars as they work in their day job or complete their studies at university. A number of athletes from the Rift Valley are employed by the military. Therefore, athletics is side hustle. It’s no wonder that some side hustles pay well than the main job!
5. Prioritizing Only your retirement and forgetting other aspects of your life
It is not a good idea to put huge sums of your money into an investment account and leave little for your cash at hand. It doesn’t matter how much you make every month. You need an emergency fund. This is an amount that can cover your expenses for six months. This will make it possible for you to handle emergencies without disrupting your savings plan.
6. Not planning and budgeting for children or future expenses
Find out how much it will cost to raise a child from birth to the age of 18 years. Then save for that kind of spending. In the USA it costs $233,610 to raise a child. This amount does not include private school fees. This is expensive when compared to Kenya where even $10,000 can afford a comfortable life for children in rural areas. If you budget for having children, you can have more humble time watching your children grow. Another option is to establish a passive income for earlier retirement.