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Reaching for Early Retirement and Financial Safety

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Blogger with many niche specialties. I write about dogs, all things under homesteading, personal finance, how to blog, and beauty/fashion.

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Since joining the FIRE community, I have set myself a task to try to be financially set in 3-5 years. My goal isn't to stop working. I just want enough money to comfortably cover all of my basic survival needs.

What is Early Retirement to Me?

Being retired means you no longer have to work for money. If you do still work it is because you enjoy what you are doing and the work isn't required for basic survival and comfort of life purposes. Having your financial survival needs met means there is amazing freedom and flexibility in how your time is spent.

Maybe you want to take a month long vacation or maybe you want to work on a private business of your own for 3 months. You can choose how you want to spend that time.

My current dream is to get myself financially set. Once free I can run a hobby farm or homestead and have zero money concerns. I used to run a small homestead several years ago and find it really rewarding and relaxing. All I had to worry about was tending my few goats, caring for my chickens, and daily chores to keep the garden looking pretty and producing sufficiently.

That was why I picked up this domain with the intent to blog about simple living involving frugality and self-sufficiency related topics. Then my life changed and now I'm a bit more money-focused for the moment.

How Do I Retire Early?

The most confusing thing about trying to figure out your own retirement is trying to figure out a sufficient goal amount. Each person or source I investigate ends up making me doubt what I will need and how to get there. I have literally read things saying I should have started working on my retirement funds since age 10. Everything else is telling me to stash away $600 a month. That would be awesome, but I don't have an extra $600 a month.

Now for myself, if everything was kept minimal, I could probably be alright on $12,000 a year. This is so long as I wasn't renting and went right to a cheap property with an affordable dwelling. This would be my "freedom" amount though I'd still keep working just on my own stuff instead. I wouldn't be financially done. My plan is a quasi-retirement and I could focus energy on my own projects instead of being chained to "normal" work.

My needs will differ from someone who is used to having a different lifestyle and thinks they require $30,000 a year to survive. This puzzle get further complicated when you factor in the spouse or children or aging parents you have to take care of because they didn't plan well for their own end of life.

Also further complicated when you are talking to people in California for example who rent closet sized spaces for thousands. Of course if you want to stay in California while being fully retired, you would need a ridiculous stash of cash to make that possible.

Strategy

To build a retirement strategy that is sound you have to keep in mind 3 key factors: income, expenses, saving.

From there you determine what is known as your financial independence (FI) number. This number is the amount you need where you are free from survival work and can focus on other things. Work should be optional when you hit this number.

The number will change over time most likely as you enter different stages of your life. The usual wisdom floating around is to save 25-30x your expected annual expenses. This amount should last for the rest of your life.

The idea here is to factor in the expected withdrawal rate and be sure it covers yearly spending needs. The usual expectation is to have a withdrawal percentage between 3%-4% adjusted for inflation.

How Much Do I Need?

To calculate the money required to retire you much first track your expenses. If you spend $40,000 per year then you need to multiply that by 25 and 30. You would need $1,000,000 to $1,200,000. Having kids will also increase the required number by an unknown amount.

The concept here is simple though. The less money you need to live, the less money you need to be free from survival working.

Expenses

It is said that the three biggest expenses for most people in the US are housing, transportation, and food. We also have to deal with medical coverage concerns. People are also largely not prepared for further education and end up taking on student loans.

Housing

Lot of people get bogged down with housing expenses. Some people instead put their house to work by listing up spare rooms on AirBnB to help offset some of the cost. I also knew a guy who lived with 4 other men charging rent and was actually making money every month while also paying down the mortgage.

Transportation

You want to retire? Don't get a car. When I have time I'm going to trying to estimate the life impact of owning a car where it concern finances. If you do need a car, be sure to buy a used car. Find one that you can preferably pay all in one lump sum. It is also important to do some research on the model you intend to buy. The cost of repairs over the life of the car makes a big difference to your goal savings amount.

One of the best purchases of my life was the introduction of a cheap Toyota Tacoma. While all my friends were lamenting having to take their car to the shop on a semi-regular basis, the Tacoma basically just needed an oil change once in a while and was fine. It still runs to this day though isn't currently in my possession. I don't need it in the city and I'm looking into how to either make or buy an electric bike.

Food

My confession here is my great expense, the one I can't control, is food. There is the usual advice of buy stuff in bulk, eat less meat or buy and butcher your own cow, compare costs between brand name and generic and be sure the unit cost is acceptable, etc. My great problem is I will start craving restaurant food. Maybe I want sushi that night or a proper bowl of pho. The thing is buying food from a restaurant is such a huge expense for convenience.

Medical

I don't advise being cheap with your medical care. If you need care, then get taken care of. It isn't worth it to put your life in danger. That being said, there is a whole world of other countries with different systems and I do know medical tourism is a thing people do after a little study.

Optimize Your Streams

Once expenses are under control, the most logical next step is nurturing the things that bring you income. I've argued with people about this, but this current moment in time is the best time to figure out how to make more money. With all the online learning platforms there is great opportunity to pick up skills that convert well for earning. Just figure out your interests, figure out if there are courses for it, and figure out if you can monetize it. If not, then look at something else.

From here you can start to cultivate a side hustle. There are numerous things that can be done. Over time I'll start to collect some of the best ideas I find in an organized post. The side hustle I am familiar with is blogging.

Even if you have no interest in maintaining your own blog, there is a pretty big demand for freelance writers. Every blogger I know wants to outsource their content a little. They want to build their site and enhance quality. Having someone else write also gives them time to work on other aspects of blogging.

The important thing here is to identify what skills you have that offer the highest payout. If all you know how to do is mow lawns, then start there. Do that a bit while you learn to code maybe. Seems the best path is to identify a need in the area. Then build something offering a service for that need. Then figure out how to operate legally and be sure to cover your butt with any needed insurance coverage.

Savings Goals

One major hurdle to saving is imaging the world 5 years from now. Most people just think about their normal day to day until they have a child. Then they start worrying about how their kid is going to afford college or what the job market will look like. Maybe they have their first health scare. Then they worry about their general safety which is of course linked to being able to pay for medical care.

For myself, I have tried to break my problem down into investing $10 a day sort of challenge. Though it will also be averaged because some weeks I make more money than others. This is usually doable for many people and one of the easiest ways to get into the habit. Set attainable goals first and then set them higher as it becomes possible. New opportunities will open up for people who work a little.

© 2020 Raven Rae