If you follow the rules that everyone else follows, you will end up like everyone else. That is, to retire at the FRA (full retirement age), dependent on Social Security income, and with about $100,000 in the retirement account. Be extraordinary. Follow these 6 steps to financial freedom and retire early.
They are audacious actions but it’s necessary if you want to be exceptional, not average.
Step 1: Save like an extraordinary person
Without cultivating a habit of saving, you simply won’t have enough money to invest in assets (stocks, real estate, or business) that make your money grow and allow you to become financially free. In order to save, you need to figure out how you can reduce your expense. Work on reducing the big-ticket items, which are typically housing, transportation, and dining out. The word save can be synonymous with sacrifice. You simply cannot save without sacrificing something.
You can drastically reduce housing cost by moving in with your family (if they’ll let you). Or, find a roommate. You will be able to save enough money to invest in wealth building vehicles.
Save 20% of Your Income
Transfer the savings directly into an account before you see your paycheck. Automate your savings.
Conventional advice says to save 10%-20% of your income. Depending on your income, this can be very little or a lot. If you make $50,000, saving $5,000 per year is a start but not enough to become financially free and retire early. Sure, you can probably still retire but without peace of mind, dignity or style.
If you save approximately $20,000 per year ($10,000 in a retirement fund and $10,000 in an after tax fund), grow it for 25 years, your nest eggs combined will grow to approximately a million dollars (7% annual).
Freedom Fund to Subsidize Early Retirement Years
Most people know the value of saving in their employer sponsored retirement account but hate the fact that it’s not available until age 59 ½. Putting some money into an after tax investment account that grows 7-9% per year, will allow you to use the money to bridge the gap between early retirement and age 59 ½. Saving $10,000 per year, with compounding effect, can grow to $100,000 in 5-7 years at 8%. I call this the “freedom fund” because it can buy you at least a year or two of freedom from work or used to buy a house or start a business.
Step 2: Set a Goal for Financial Freedom
Begin with the end in mind. – Franklin Covey
Calculate monthly expenses required to retire early Most can live on $5,000 or less if the house is paid off. You may need a little more if you still have a mortgage or rent.
For example, $5,000 per monthly expense sums up to $60,000 per year. Your early retirement goal is to generate that amount. If you can accumulate $1.5 million in paper assets (stocks and bonds), you can withdraw 4% to generate $60,000 per year. If you can get by with less or on $3,000 per month, you need to accumulate $750,000. Set yearly goals on how to achieve this and read it daily.
Step 3: Make More Money
An average nurse makes $50,000 per year. Is this enough to save $20,000 and live on the rest?
It’s not difficult for nurses to make extra income working per diem at another hospital.
Go into a specialty. ER, OR, or ICU nurses are in highly demand and can easily make extra income. Find a hospital with a training program or a community hospital that is willing to train you on the job. You will be more marketable and make more money at the same time.
Start a Side Hustle
Consider being a Legal Nurse Expert in your field. Utilize the knowledge you already have. You’ve never done it? You don’t know how to do this? Everyone starts somewhere and the malpractice attorneys and the firms are always looking for someone. Trust me, I know. Find a mentor who can help you do this.
Climb the Career Ladder
Become a manager, director, or a VP. They’re not smarter than you. They just wanted these positions more than you. The average salary of an administrator is $117,000. Money can’t be the only reason to become an administrator. Ask yourself the following questions?
- Have I grown out of my position?
- Do I want to continue to learn new skills and grow in my career?
- Are having autonomy and control over my schedule and role important to me?
- Can I build and improve my leadership skills?
- Am I destined to make more income?
If the answers are “yes,” why not go for it?
Don’t limit yourself and be content with your current salary.
Find a mentor who can help you.
Step 4: Make Your Savings Work for You
You will not be able to retire early by keeping your money under a mattress, which is similar to putting it in a money market fund. This may be the riskiest thing you can do. Don’t be so risk averse that you retire without dignity, peace of mind or style.
At minimum, put your savings in stocks if you have 20-30 years to invest. Investing doesn’t have to be complex. Many companies offer a fund similar to the 500 Index Fund that you can put your money into. They may also have target date funds. If you plan to retire in year 2030, put your money into that fund. If you want to be more aggressive, put your money into 2040 fund, and etcetera. This will save you the work of rebalancing your fund.
Many companies have a financial advisor to help you navigate through your retirement fund that you can consult with. Seek a financial advisor for advice.
One of my colleagues and I started on a similar career trajectory. She invested safely while I invested aggressively. I retired comfortably 10 years earlier than FRA (full retirement age) while she retired anxiously past the FRA.
Step 5: Take a Risk to Attain Financial Freedom and Early Retirement
Invest in Real Estate
Invest in real estate if you intend to live in it or keep it for 10 years. When the value increases and you can generate passive income, rent it out. Buy another house and repeat. Buying a house is a big decision but the process is not difficult; 65% Americans have done it and are homeowners.
If done right, rental properties can generate passive income while the value of the properties increases. Plus, you have additional tax advantages. When your passive income exceeds your expense, you are financially free.
Also, you can sell one of your properties and live on the proceed when you’re ready to retire. You can have passive income supplement your early retirement. This way, you’re not dependent solely on 401(k)/ 403(b), which are at the mercy of the stock market.
Is real estate investing risky? You can control and mitigate the risks by saving and having minimum six months of mortgages will help you weather the storm of recession or housing crisis. Having enough equity (20% or more) will also help you sleep better.
Start a Business to Obtain Financial Freedom Quicker
Do you have a unique interest that others would be interested in? Start a business. There has never been a time as now to start a business. You can generate extra income buying things (clothes, furniture, gadgets) on sale and selling it for a profit. You can sell your talent, such as website design. Using social media and some creativity, you can start and succeed in a lucrative business.
The point is, no risk, no reward.
Step 6: Envision Where You Want to Be
Whether it is living in a RV, traveling throughout the states or living in a beautiful house with a view, have a vision of where you want to end up.
We spend so much time working and work related activities such as getting ready for work, driving, spending 8-10 hours working, shopping for clothes to go to work in, that we forget to make time to think about the reason why we do all this. I recognize we do this for our family and children, but I have news for you. Your children will grow up and leave you one day (if you’re lucky). Then, where will you be?
Here’s how I envisioned my financial freedom and retirement:
- Start with a daily ritual with meditation, stretching, exercising, and writing
- Garden, cook, and walk
- Give back to the community through volunteer work
- Travel to all the national parks
- Travel internationally
None of these things involve being financially stressed.
Create a vision page of pictures of where you want to be and your goals to keep you focused and on track for financial freedom and early retirement. One day, you will wake up and know exactly how you got there.