Retire by 50. Travel the world at 60. For most of us, goals like these seem a little out of reach. Yet some people actually achieve them by planning for financial independence early in their careers. People are considered financially independent when they no longer have to work to afford the lifestyles they want. A person who works for the fun of it and not out of economic necessity is also considered financially independent. The question is: How do we become one of these people?
Make saving a top priority.
Many of us do this already by funding a 401(k) plan where we work. Your savings are deducted from your paycheck before you begin spending money on housing, food and other essentials. A big part of achieving financial independence is to consider saving “an essential”. Even if you don’t qualify for a 401(k) plan, you can still set aside money each month to invest in the stock market. Between 2010 and 2013, the average rate of return on stock market investments was 16.74%. However, the average rate of return during the 2000s was just 1.07%, so you have to be comfortable with the economic ups and downs of buying and owning stocks long-term. As you near your target retirement age, you should also pay closer attention to stock volatility and opt for lower risk investments.
Find out more about IRAs and other savings accounts from The First at http://www.fnbn.com/savings/individual-retirement-iras
Shop for investments instead of material goods.
Does your home have a Consumer Electronics Graveyard? That box or drawer overflowing with obsolete phones and gaming consoles you once felt you couldn’t live without? What if you had taken the money you spent buying the latest phone and invested it in the company that manufactured the phone? That could have been another step towards financial freedom.
People who can afford to retire early tend to focus more on acquiring investments than material items. They look for investment properties or collectables to create other sources of income in addition to their salaries.
The First’s Trust & Wealth Division can help you reach your financial goals.
Finally, avoid comparing yourself to other people.
Most people don’t save enough to retire early. In fact, a recent national poll found that 36% of Americans aren’t saving for retirement at all. If you want to be financially independent, accept that you’re going to manage your money differently than your neighbors, family and friends. You may not impress anyone with your medium-sized TV, compact car or modest home, but you may acquire a sense of freedom and peace of mind that nobody can put a price tag on.
This blog is for informational purposes only and should not be considered legal or financial advice. Consult a financial or tax professional for advice that best suits your saving and/or investment goals.
What is your strategy for a comfortable retirement? Let us know in the Comments below.