Early retirement can be thought provoking for many people but only a few get to live the dream. The reason behind the low numbers of people who manage to successfully transition from employment before reaching their retirement age is due to the financial planning required as one plans to retire early. Unlike the normal retirement where you leave your employment at an advanced age, with early retirement you are leaving at a tender age with a lot of financial responsibilities to handle. This therefore calls for a thorough personal financial planning and budgeting before you take the bold step of stepping out of employment at an early age.
In personal financial planning, you start with your projected monthly regular expenses and how you expect them to grow over time as your family expands and your children start going to school. Depending on the age at which you would like to retire, the figures can vary significantly and getting the exact amounts can be a toll order. It is therefore advisable that you work with rough estimates and assumptions based on comparable households living the kind lifestyle you envision for your family as it grows. In addition to using the current household expenditure figures from comparatives; you should also add a premium to take care of inflation and other unforeseeable incidences that might require a budgetary allocation.
Once the expenditures are in place, the tough work of now sourcing for funds to meet those expenses starts. The first point of call for salaried employees is usually their monthly salaries; with promotions being their first strategy of increasing their incomes over time. However, when you are planning to retire early, your salary alone cannot suffice to meet your costs of living in the initial days after retirement and thereafter. You will therefore need to look for other alternative ways to earn extra incomes which you will then pull into your early retirement fund. When choosing alternative sources of income, you have the conventional and unconventional channels to choose from.
Unconventional sources of extra personal income
Top on the list of the preferred unconventional alternative sources of income is online trading. Online trading is preferred due to its ease of learning how to trade and the ability to trade from anywhere for as long as you have an online trading account and internet connectivity. In most cases your focus will be on predicting the direction the price of the underlying asset and if you get it right you get you returns from the margins between the opening and closing price of the underlying asset. In online trading, you have the opportunity of leveraging on the float provided by the broker and earn returns in the north of 80% of your original investment from one trade. However, with these high profit margins also comes high risk of loss if you have not learnt the market trends for your preferred underlying asset well.
To ensure your online security is guaranteed while trading online, you will need to open an account with a credible online broker after conducting a thorough due diligence. In addition, daily market reviews such as those offered by Lionexo on their online channels are also a key consideration when choosing from your array of potential online trading platforms. Once you find a trustworthy broker with reliable trader support systems, you can then start learning how to trade and allocate a part of your monthly income to online trading; in order to grow your money much faster in preparation for an early retirement.
For the risk averse individuals, online trading may be too much for them despite of the high returns it can earn you over a short period of time. For such individuals, the conventional investment channels provide a good source of regular extra income to contribute to your early retirement fund. The basic and the most common investment by most salaried employees is saving through a fixed deposit account; where they make regular monthly deposits and earn interest income from it. However, the returns here are minimal and for a person planning to retire early; this might not be lucrative enough.
Other conventional channels include investing in government bills and bonds. These will give you higher interest incomes but still not significant enough to help you save enough to fund your initial days after your early retirement. To get higher returns, you can choose to invest through mutual funds and unit trusts and carry over the investment into your retirement. For even higher returns, you can delve into investing in equities through the stock market for listed companies or through venture capital where you buy a stake in startups; and enjoy regular annual dividends after your early retirement. Investing in real estate is also a great channel that will earn you a regular monthly income in form of rent for as long as your property is occupied and maintained in good condition.
Choosing between the different investments options to diversify your income before retirement will be determined by many things. Among the top factors to consider however is how many years you have before you retire and the kind of lifestyle you want to adopt after your early retirement. You will then need to find a source of income that will be able to raise the needed early retirement fund within your specified period of time before you retire; and start investing and trading immediately.