The secret for early retirement…

From a young age, most Indians are instructed to get an education and then a job. After getting a decent job, the recommendation is to save as much each month for next 30 years until retirement and build wealth that will help in leading a comfortable retired life.

We all follow the same path, spending majority of our life time at work, trying to climb the corporate hierarchy, to get a raise, to buy a bigger house, to fill it with more stuff that wasn’t necessary and so on. Only after retiring is there room to explore, relax, or spend time with family and hence , most people today desire to retire early to get out of this cycle.

You may call it the time-money irony. Most people trade the majority of their available time for earning an income, and then spend the majority of all earnings on depreciating material possessions. As the spending snowballs, many individuals desire a larger income, which requires longer hours and more responsibilities at work, which means even less time to enjoy the additional income. It’s a vicious cycle that often continues in perpetuity and the plan to retire early never ever gets fulfilled.

The secret to early retirement is enjoying Financial Freedom?

Instead of material possessions, individuals should prefer to have financial freedom. Freedom to change careers, start a business, take some time off, or travel the world. It’s not about what you choose to do, it’s about having the freedom to choose and do what you want to do. This will allow you to enjoy even before you retire.

Stages of career and Financial Freedom:

Early years in career: Most of us begin the journey by relying on a monthly salary. At this stage, a job and reliable income stream is required. Without the ongoing salary, any savings could be quickly depleted. At this stage there is no freedom and retirement at this stage is next to impossible for many unless you have inherited wealth from your parents.

10 to 15 years in career: This period can graduate many into the mid stage of financial freedom, for this you must spend less than you earn and create a pool of savings. Otherwise, you will be forced to continue working indefinitely because your lifestyle depends on your employment income. As you begin to save a portion of your income, you might invest your savings in a diversified investment portfolio to produce a regular stream of income. Or, you might start a business on the side, creating another stream of income.

At this stage your freedom grows alongside your savings. Eventually, you will have enough money saved to feel comfortable starting a business, following your passion, traveling for a year, or any number of other activities that are impossible to achieve while working full-time. But your freedom is temporary until your income exceeds all of your expenses. If planned well many can achieve early retirement at this stage. Key for an early retirement in your mid-forties is to control your expenses and have alternate income stream while you are working.

Final Stage: At this stage, your total non-employment income exceeds your total expenses and you no longer require a steady monthly salary from your employer. You likely have a reliable side business (something you enjoy doing and is your passion) and/or a large investment portfolio producing a substantial amount of income. This is a stage where one can definitively think of retiring early and lead a secure life and follow his passion.

How do you know that you have financial freedom and are your ready for an early retirement?

Ask yourself these questions:

Are you happy with your existing lifestyle?

Have you found a meaningful work-life balance?

Have you created an alternative income stream?

Will you be able to survive if your monthly salary stops from next month?

These can be difficult questions to answer, but they provide a great deal of information about your desire for financial freedom and your ability to retire early.

Financial freedom does not always require that you retire early to live a leisure life (unless that is your desire). It’s about having self-sufficiency and independence in your daily routine, allowing you to design a better life while spending your time, money, and energy in a more meaningful way. If that includes starting a new business, great! And if your financial status allows you may retire early as well.

Happy Early Retirement! 




Inspired from a forward I received on my whatsapp wonder box


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