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Early Retirement: Would you like to travel the world at your leisure?

Do you want to be able to pick your retirement date? What type of lifestyle do you want in retirement, modest or comfortable?

The biggest difference between a comfortable and a modest lifestyle is the cost of our leisure activities.

I like the idea of more people having the choice to retire younger. The trick is to know what sort of lifestyle you want to enjoy in retirement. Once all the essential expenses are out of the way our lifestyle budgets will get the balance.

This could mean the difference of over $10,000 per annum or more for a couple. It goes back to planning and have you given much thought to what you want to be able to do in retirement? Do you want to travel and if so how often and to where? Are you happy to do a road trip within your country or do you want to travel overseas? Are you planning to go the movies, take in the latest show at the theatre and go to the game? How often will you eat out? If you struggle to make ends meet then leisure pursuits will have a modest budget. You can still have an enjoyable life but you will have to put effort into planning your social activities on a budget. 

To achieve early retirement we all need to have a strategy in place to save more than we spend. The earlier you want to retire than the more you need to save. How much is enough is the age old question? A guide is to put away at least 15% of your income. In some countries it is compulsory for an employer to put a portion of wages into a retirement plan for employees. A good start for you then is to top up your retirement savings with the difference. In Australia compulsory superannuation for retirement is currently 9 1/2% of gross wages. You need to be prepared to save at least 5 1/2% extra towards retirement on a regular basis.

If you want to get really serious then you could consider extreme savings. Mr Money Mustache states that 'your middle-class life is an Exploding Volcano of Wastefulness'.  He advocates that you will easily be able to cut your expenses in half so you can save half of your income. He even advocates saving two thirds or more. He claims that by spending much less than you earn is the way to get rich. The ONLY way with surprising effects: if you can save 50% of your take-home pay starting at age 20, you will be wealthy enough to retire by age 37.

Depending on which country you live it this may or may not be possible. It would be a good challenge to see what you could cut back on to save more of your take home pay packet. I read of a lady in the USA that after having a hard look at her expenses decided to sell her house, save the mortgage payments and chose to live in a trailer park. The mortgage payments went into her retirement savings instead and she is now well on the way to having an early retirement. One family have given up their cars. They catch public transport, ride push bikes and walk. You can run a ruler across all of your expenses like buying the cup of coffee or more every day and see where money is being spent on non-essentials items.

 To make significant differences to your savings may require a complete re-think to how you currently live. Are you up for the challenge? Depends on how badly you want to be able to pick your retirement date?



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Thursday, 24 January 2019

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