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By Lisa Bigelow
Special to the Financial Independence Hub
Retirement! For many of us, it’s an event so far in the future that it almost seems unreal. Taking active steps to plan and invest for the “golden years” feels unnecessary.
Yet as anyone who’s lived through their 30s and 40s can share, those decades go by quickly. And if you want to retire early, the worst thing you can do is wait to start saving or unintentionally sabotage your portfolio.
Long story short, if you want to retire early (and wealthy), you’ll want to start now. But what does “start” mean when it comes to saving for retirement?
The answer is surprisingly complex. The good news is that learning how to build your nest egg won’t consume all of your free time. With attention and discipline, you can retire early: so let’s get started.
1.) Visualize your future and figure out what that costs
You wouldn’t renovate your kitchen without choosing a style and establishing a budget. Think of building your nest egg the same way: you need a goal and a plan to get there. Sure, you know you want to retire early. But what does retirement look like for you once you’re there? Do you want to travel? Live in your hometown? Play bridge? Take piano lessons? Visualizing your retirement home base and how you’ll spend your free time will help you set your savings goal.
Envisioning a loose plan for what you want your post-work life to look like is a great start. But you’ll also need to take into account inflation and investment returns, among other factors. AARP’s retirement calculator can help you understand where you’ll need to be financially in order to achieve your goal. It will also help you prioritize the actions you’ll want to take now so you can actually get there later.
2.) Pay off debt and reapply the payments
Debt is a normal part of life for most Americans. Buying a home or paying for college often requires taking out a loan, and so does starting a business. Borrowing responsibly in these areas can help you get ahead financially, but other kinds of debt, like high-interest credit card payments, can hinder your retirement savings efforts.
First, if you have education debt and think the scholar-”ship” has sailed, think again. There are actually scholarships that pay off education debt for borrowers who have already graduated. And if you have excellent credit, you can also look into refinancing your student loans.
If you have credit-card debt, personal loans, or other high-interest payments, prioritize paying off those balances in full. If the payments were manageable for your budget, repurpose those payments into building your nest egg instead. Bonus: once you’ve paid those debts, your credit score will probably rise. And that helps you qualify for lower rates when refinancing or taking out a new fixed or adjustable-rate mortgage.
3.) Get sneaky with microsavings so you can live life along the way
Small dollars add up fast. That’s great news for people who want to enjoy life and save for retirement at the same time. If you’re aggressive with microsavings, you’ll have an easier time affording life’s little niceties and still be able to save for retirement at the same time.
Don’t overlook the importance of maximizing:
- Credit card rewards. You can save on everything from groceries to travel with the right credit card, but evaluate rewards programs thoroughly to choose the option that makes the most sense for you. And most importantly, to gain the biggest financial benefit, manage your credit. That means paying your balance in full and on time every month.
- Micro Investing. Always use the “round up” feature for debit card purchases. You’ll never miss the money, and it’s a great way to save for non-retirement-related goals.
- Spare change. Yes, actual change is still floating around. Empty your wallet, backpack, and jacket pockets at the end of every month and put the total into savings. Like micro investing, values add up fast and it’s a great way to save for things you want that sit outside your budget.
- Browser add-ons. You’re going to shop online already. Why not earn cash back rewards at the same time? Browser add-ons like Capital One Shopping can be a significant source of saving.
- Being smarter with your money in general. Avoiding traps that seem smart but that really rip you off is critical.
4.) Find easy wins
When it comes to easy wins, there’s nothing like finding free money. If someone handed you a few thousand dollars to deposit into your retirement account, would you turn it down? Probably not, but if you’re not contributing to your employer-sponsored retirement plan and your employer offers a match, that’s what you’re doing. Just do it. You won’t regret it later!
Long story short, the common themes here are getting educated, practicing disciplined saving habits, and staying patient as you watch balances grow. And as your 30s and 40s become your fun-filled, no-work 50s and 60s, you’ll be glad you did.
Lisa Bigelow writes for Bold and is an award-winning content creator and personal finance expert. In addition to FindependenceHub.com, Lisa has contributed to OnEntrepreneur, College Money Tips, Finovate, Finance Buzz, Life and Money by Citi, MagnifyMoney, Well + Good, Smarter With Gartner, and Popular Science. She lives with her family in Connecticut.
