If you want to retire early or just retire in general, there are some things that you need to do. A comfortable retirement does not come without a bit of work and often, some sacrifice. Check out some of the basic steps that you need to take in order to build your wealth.
1. Have An Emergency Fund
What would happen if you faced a financial emergency where you could not work for 2, 3 or even 4 months? Would you be able to weather the storm or would you sink to the bottom and lose everything.
There is one simple thing that it takes to get through a financial crisis and that is money, you need lots of money. A well stocked emergency savings is the first thing that you need to build if you want wealth. You should have at least six months worth of expenses in this account. Make the account easily accessible as well, you would not want it to be tied up in an investment.
If you have an emergency savings, if the worst happens, you can get through it just fine. Without it, you risk losing the rest of your assets, damaging your credit and setting your retirement back years.
2. Start Saving Money
Everyone know that they need to save money but nobody likes to do it. Instead, people spend every dollar they earn each month, if not a little more. This is why so many people are deep in credit card debt.
If you do not earn more than you spend, there is a problem. You need to cut your expenses down so that you can take the extra money and put it into an investment account for retirement. Save money wherever you can and cut down on spending.
You should be taking 20 percent of your take home pay and stashing it away. Open an IRA or at least a high yield savings account.
3. Protect Yourself
Insurance is key and you need more than just auto insurance. Think life insurance and disability insurance. What would happen if you or your spouse died. Would the other one be okay. Also, what would happen if you became disabled. Could you afford to pay your bills or would you lose it all.
Hopefully, you will never need disability or life insurance and they will be a big waste of money. If you do use them though, you will be grateful for the day you signed the papers.
4. Start Investing
That savings account is great and it is a very good start. It is not going to get you too far though if you really want to build some wealth. You need to do better than a 2 percent return.
To build real money, you need to invest. Investing is incredibly easy these days with discount brokerages and free trading from places like Robinhood. If you want to keep things simple, check out a managed IRA and et your risk levels. You should be able to easily earn a 5 percent return at low risk and if you are brave, you can do much more. Just be sure to taper off your level of risk as you age. If you are 10 years from retirement, you can not afford to risk it like you could in your 20’s.
5. Make As Much Money As Possible
You need to maximize your earning potential. The more that you make now, the more you can save.
The best way to increase how much that you earn is to make yourself more valuable to you employer. Get certifications, an advanced degree or learn a new language. Make yourself indispensable and the money will follow. If it doesn’t, take your skill set and shop it to another company. In any case, do not be complacent and accept what you have now, strive for more.
If you are in a job with a ceiling and you have spare time, work. It is as simple as that. Just a few extra hours a week at a part time job can yield hundreds of thousands of dollars later, in retirement. Think of yourself as that squirrel collecting nuts.
6. Get Started Right Away
The sooner you get started the better. A thousand dollars saved now is worth far more than a thousand dollars saved in 10 years. Think about all of the compound interest you are missing if you do not begin saving right away.
Tina’s last Word
Unless you inherit money or become a pro athlete, building wealth takes work and devotion. Everyone envies the well off but they do not always understand that it takes a lot of discipline and hard work to get to that point. Some are lucky but most have to work for it.