5 Money Moves To Make When You Wish To Retire Early

By Adhil Shetty | February 16, 2018

Retiring early requires methodical planning and a disciplined approach. Follow the five smart moves listed here to secure a stress-free retirement life.

5 Money Moves To Make When You Wish To Retire Early

Many of us carry this wish of retiring early and living a life of leisure, in peace. This may sound very fancy but is not easy to achieve. It requires methodical planning and a disciplined approach to reach that stage. What’s crucial in the process is to utilise one’s income in a judicious way that brings greater returns during retirement.

Let’s take a look at five smart money moves you must make if you wish to retire early.

Budget Allocation

When we start earning early, we tend to splurge and spend all our income on things which fancy us, but are unnecessary. To avoid unnecessary expenses, it would be wise to make a monthly budget, which will help us allocate funds for various essential expenses such as household items, electricity bills, telephone bills etc., and most importantly savings. The budget allocation would inculcate a habit of discipline. It will not only cut down your unnecessary expenses but will help you focus more on saving money.

Increase Your Savings To Income Ratio

Usually, we tend to save whatever is left after all the monthly expenditure. But if you wish to retire early, you would need to change this habit. If you wish to retire at 50 instead of 60, then you will have to save a large portion of your income to create a Retirement Fund. Usually, it is better to save 10 to 15 percent of your monthly income. But if you wish to retire 10 to 15 years early, then you need to save 40 to 50 per cent of your monthly income. This can be achieved by careful planning and disciplined approach.

Pay Off Your Debts

For a peaceful retirement, it is important that you pay off your debts like Home Loan or Credit Card dues early and in a prudent way.  You can increase the monthly EMI or pay off the debt in a lump sum amount or contact the lender to restructure your loan. If you have a credit card debt, you can opt for zero per cent balance transfer. This feature allows you to transfer your debt from a particular card to another card with 0 per cent or low interest rate and thus it will help you save money on interest. But this offer is for a limited period of time. Hence, you must pay off within that period to avail the benefit.

Invest In A Pension Scheme

When you retire at the age of 65, you will have to depend on your savings to cover up your monthly expenses. But that is not the case if you have invested in a pension scheme to support you in your retirement life. Even if you wish to retire early, say at the age of 50 for a life expectancy of say 75 years, you will need a monthly pension scheme for 25 years. Hence, you must take a good pension scheme that will factor in your consideration for retiring early, and give you monthly pension for a larger duration to fulfil your needs.

Invest In SIP

Starting early and investing in instruments that can yield good returns would help you accumulate a hefty sum for retirement. You just cannot rely on your monthly savings to build this retirement fund. Investment instruments like Fixed Deposit or Savings Bank Account are good, but do not guarantee higher returns. You need to create wealth over a long period of time to set up a retirement fund. You can invest in SIP which will help you minimise the risk of equity fluctuations, while investing your money periodically through equity mutual fund. Returns are generally high due to compounding benefits and investment over a long period of time.

You must make your money moves wisely to retire early and have a fun-filled retirement life.

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About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

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