By my mid-20s, I didn’t believe in the power of saving for retirement. At the time, I could barely make enough money to cover all my living expenses. If I had any money left over, I’d spend it on happy hours with friends, dinners out, and traveling.
Throughout my 20s, I had people — from my boss to my ~*financially savvy*~ friends — encourage me to set up a retirement fund, but I resisted. It felt nearly impossible to put away money for my future self when I was living paycheck to paycheck.
But before I turned 30, I realized I needed to change a lot of my financial habits in order to reach my big personal goals, which included increasing my net worth and finding a way to retire a millionaire by 50.
At the time, I had no retirement savings and very little in savings. So for the first five years of my 30s, I’ve been focused on building my financial literacy and sticking to a financial plan.
Here are four ways I’m making early retirement a reality:
1. I track every dollar I earn and spend
In the past, I stressed out about the idea of budgeting. But without ever looking at my bank statements or credit card bills, my spending spiraled out of control.
To make sure I’m on track to becoming a millionaire and retiring by 50, I keep close tabs on every dollar that comes in and goes out of my accounts.
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I stick to a strict monthly budget. I make sure I’m only spending a fraction of what I earn, much less than I used to, so that I can catch up and save more.
First, I allocate a certain amount of money to different categories, from food and clothing to housing. On the 15th of each month, I see how much I have left and then budget out the rest of the month, without going into debt.
Sometimes, I find myself cutting back on eating out more than I did before, which is just one example of how sticking to a budget helps me avoid making — even small — money mistakes.
2. I’m always exploring new revenue streams
After I was laid off from my full-time job in 2015, I decided to become an entrepreneur. My main goal was to double my income through my business ventures and continue to find ways to make more money than I could at a corporate job. I’ve diversified my income with passive revenue streams, such as selling digital products (courses and ebooks), affiliate marketing, and dividend income from my investments.
And one of the biggest ways I’m going to reach my goal of retiring a millionaire early is to continue to find ways to supplement my income. To that end, I spend about five hours each month researching new revenue streams that I can create, whether it’s through a side hustle or a new product.
3. I’m sticking to an investment plan
As I became more financially literate, I was able to start saving more money each month. A few years ago, I created a diversified portfolio of long-term and short-term investments that work for me. I’ve worked with several financial advisors to find the right mix of stocks, bonds, mutual funds, and other investments for my needs and risk tolerance. I make monthly contributions to my investments, which compound over time to increase my net worth.
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4. I’m saving smarter
Even though I put the majority of my money toward investments, I still need to keep some cash on hand in my savings account. One of the biggest money mistakes I made in my 20s was keeping any extra cash in a low-yield savings account.
Now, I make sure to keep my money in a high-yield savings account. I also make a point of consistently adding to my savings, so that the power of compound interest can work in my favor.
For example, earlier this year I moved the majority of my cash savings into a high-yield savings account and certificates of deposit that earn between 4% and 5%. Over time, the money in these accounts will continue to grow with compound interest.
Source: BI
