Almost everyone dreams of an early retirement but without clear milestones to achieve, the feat will be hard to accomplish. People should not rush too much though, as with proper budgeting and saving, they could reach that early retirement. At the very least, they should try to accomplish a few financial milestones before reaching a certain age.
The Motley Fool shares a few milestones people should already have by their 40th birthday. Considering most people begin working at around their early 20s, these goals are fairly achievable. These milestones not only set people on a path toward financial stability, but it also gives them the chance to retire early.
Settle all debts
One of the major hurdles for today’s workers is debts. By the time they are 40, they should have all of these settled and should avoid making any more. Debts tend to get bigger with interest so people should not let it balloon. By settling debts early, they will be able to place their salaries in a savings account they need in the future.
Ready your retirement account
The key to getting an early retirement is by having a retirement account ready. Retirement accounts are built through various methods such as saving a percentage of a monthly salary or even through the gains in an investment portfolio. Although there is no set amount of what a retirement account should have, it is ideal to have at least three times their salary by the time they are 40.
They could use this amount to start a small business or to invest in the stock market. It is not something people should spend in one go.
Retirement funds are typically opened with the help of the IRA or 401(k) but people can start one on their own using separate bank accounts. According to CNBC, today’s young workers are dipping into their retirement funds. This is not advisable as they are removing the future earnings the amount would have had. Furthermore, they have to shoulder a withdrawal penalty in doing so.
Have at least three months worth of living expenses at bay
Emergency expenses such as hospital bills and house repairs are bound to set back people who do not have enough cash on their bank account. Many workers today live through their entire month’s salary long enough to make it to the next payday. Such a practice is not applicable to 40-year-olds, however.
The best course of action is to have at least three months worth of living expenses on their bank accounts. Now that the holidays are around the corner, people will find it harder to save that amount even if their Christmas bonuses arrive. People should stretch their budget for the holidays by avoiding things they do not need and by selling items they no longer have a use for. They could use what is left of their bonus as a part of their emergency funds in the future.
Early retirement and achieving these money goals go hand-in-hand. By successfully making the milestones above, people will have the financial capacity to spend the other half of their life relaxing.
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