“I don’t wish to work anymore…”
“How long more do I need before I can retire?”
“Do I have enough for my retirement?”
Are these words familiar to you? Maybe you mumbled these to yourself before?
If you have, you are not alone. Many of us are tired of working and wishes to retire early. However, over one-third of us do not believe that we have enough money to live on in retirement.
Many of us, including myself, have tried many ways to earn more money so that they can retire early. Some have tried working harder to get a faster promotion, while some started their own businesses.
However, not all of us succeed. There are many reasons to why people succeed in retiring early and we shall look into some of the reasons in this article.
One most important reason why people fails to retire early is because they will spend whatever they earn. Worse still, they spent more than they earn!
When these people start to work harder to earn more money, they will tell themselves to reward themselves for the first month when they receive their increased paycheck. As time goes by, no matter how much more they earn, they will spend the increments that they worked hard for and finally resulting in spending more.
If they are lucky, they increase their spending only limits to the extra income they have. Some even spent more than what they earned.
Doing an annual budgeting exercise can help to prevent overspending, which is the top show-stopper from allowing you succeed in retiring early.
Pay Yourself First
If you might have heard of people telling you, pay off your loans first before you save so that the incurred interest will be lower.
Is that true?
Just a few years back, I was in all kind of debts. Initially I was overspending and without proper budgeting, my spending grew bigger and bigger until I had spent all my savings. Then came one year I decided I had to do something.
I decided to start investing but I realise I had no savings at all and in the end, I turned to getting an unsecured bank loan of around $12,000 with a monthly repayment of $250 for five years.
Initially, I took the advice of paying off my loans first by paying $500 per month hoping to reduce the loan period by half however, halfway through, lost almost half of the loaned amount in trading. Worse still, my savings is still at zero because I had push up my repayment amount for my loan and did not save a cent.
This was when I realised that paying off my loans first does not work!
What I did after was against the norms. I reduced my loan repayment amount by half, back to the original repayment amount calculated by the bank and paid myself first. A portion of the saved amount went to my savings and the other portion went to stock investing.
In just a short two years, not only did I manage to repay the bank loan, I had managed to have some savings and built my investment portfolio from then.
Today, although I still cannot retire early, the move to repay myself first managed to clear off all my debts, have enough savings for emergency use and also built my small portfolio, allowing me to have a clear direction on my journey to financial freedom and retire (hopefully earlier than the norm).
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