Posted By 
By Abid Salahi
Special to Financial Independence Hub
If you had told me in my early twenties that I’d be already planning for retirement before my first major job promotion, I might have laughed it off.
Like many young professionals, I was more concerned with navigating the beginnings of my adult life and my first ‘real’ job than retirement, far in the future.
However, a deep dive into the financial world revealed the concept of ‘Financial Independence’ or ‘Findependence,’ a state where you have sufficient personal wealth to live without having to work actively for basic necessities. Essentially, what it means is that you can retire way earlier than what society considers ‘retirement age’ and enjoy your retirement while you’re still relatively young.
Today, as I share my experiences and the strategies that I’ve learned along the way, I hope to inspire you to start thinking about retirement sooner rather than later. After all, achieving financial independence is not just a goal; it’s a journey that offers profound peace of mind.
Start Early and Embrace the Power of Compound Interest
Let’s talk about the first and most important strategy I adopted; harnessing the power of compound interest.
Compound interest is like a snowball rolling downhill; as it rolls, it picks up more snow, growing bigger and faster. When you save money, compound interest works by earning interest on both your initial amount and the interest already earned.
This means your money grows faster over time. For example, investing just $200 a month starting at age 25 could grow to more than $500,000 by age 65, assuming an average annual return of 7%.
Diversify your Investment Portfolio
Diversification is key to managing risk and maximizing returns over the long term.
I’m going to say it again … DO NOT invest all of your money in one single asset!
My approach has been to spread investments across a variety of asset classes including stocks, bonds, real estate, and even some alternative investments like cryptocurrencies.
But again, if you spread your investments into too many different assets, the profit you might obtain from each investment could become very small and not that significant. So, not too many but also not too few.
Take advantage of Tax-Efficient Accounts
In both Canada and the U.S., you can take full advantage of tax-advantaged retirement accounts. How? Let me elaborate.
In Canada, utilizing the RRSP (Registered Retirement Savings Plan) and the TFSA (Tax-Free Savings Account) can significantly enhance your savings growth by deferring taxes or allowing tax-free gains.
In the U.S., similar benefits are offered through IRAs (Individual Retirement Accounts) and 401(k)s.
The amazing thing about these accounts is that they not only reduce your tax liability but also allow your investments to grow unhindered by taxes, which can make a substantial difference over the decades.
Consider Real Estate Investments
When talking about investments, it’s impossible to leave out investing in Real Estate.
Real estate can be an excellent addition to any retirement strategy, offering both capital appreciation and potential rental income.
Personally, investing in rental properties, both short-term like Airbnb and long-term has provided me with a steady secondary income stream. This steady income is incredibly beneficial for building wealth over the long term.
Real estate can also bring unique tax advantages such as the ability to deduct mortgage interest and property taxes, depreciation, and potentially avoiding capital gains tax through strategies like the 1031 exchange.
Maintain a Long-term Perspective
One of the most challenging aspects of planning for retirement at a young age is maintaining a long-term perspective.
Early in my investment journey, I watched the market dip significantly.
I admit, I panicked and thought I had wasted my money …
However, I learned to view this as a buying opportunity and adjusted my portfolio to include more stocks at lower prices. This personal experiment paid off as the market eventually recovered.
So, staying committed to a long-term investment strategy and regularly reviewing and adjusting your portfolio can keep you on track toward achieving early retirement.
Educate yourself Continuously
Lastly, I want to talk about how continual education has been a cornerstone of my journey.
The financial world is dynamic, and strategies can evolve all the time.
Keeping up to date with financial news, learning about new investment opportunities, how to use credit cards and understand the economic factors that affect your investments help you to make informed decisions.
Some of my go-to sources include the Financial Times, The Economist, and financial podcasts like “The Investors Podcast,” which have deeply enriched my understanding of the financial markets.
Now that you are aware of the different strategies I used, it’s crucial to remember that the choices we make today can define our freedom tomorrow. I’m here to help you to retire early and actually enjoy your retirement while you’re still young!
The mentality of “you’re still young, so enjoy it” often prioritizes spending over saving. However, investing early unlocks the chapter of life where work is optional and your time is truly yours.
So what are you waiting for? Don’t wait for tomorrow to start building your future! Act now, and make the dream of an early retirement into reality.
Abid Salahi is the Co-founder of FinlyWealth and creator of the Finly App. He is passionate about personal finance and empowering Canadians to achieve their financial goals through personalized credit card recommendations.
