If someone retires early, you know they’ve done something right. If someone is financially free in their 40s, you know they’ve made some smart moves.
However, getting to this point isn’t as simple as it sounds. It involves a complex and strategic combination of decisions, actions, and habits throughout one’s life.
But some people do manage to crack the code. And that’s usually because they’ve followed these 8 specific steps in their 30s and 40s.
So, let’s dive into the habits of those who have unlocked the secret to an early retirement.
1) Embrace frugality
Money is a tricky thing.
It can make life comfortable or it can make life stressful, depending on how you manage it. And if you’re aiming to retire early, your relationship with money needs to be more than just good. It needs to be exceptional.
Early retirees are often highly disciplined and live well below their means. That doesn’t mean they live a deprived life. Far from it, actually. They’ve simply mastered the art of distinguishing between what they want and what they need.
They’re frugal, not because they have to be, but because they choose to be. They understand that the secret to amassing wealth isn’t necessarily making more money, but saving more of it.
So, by embracing a minimalist lifestyle and cutting back on unnecessary expenses in their 30s and 40s, early retirees pave the way to financial freedom.
Sounds simple enough, right? But it takes a lot of discipline and determination to resist the temptation of consumerism. However, once you master it, you’re one step closer to an early retirement.
2) Invest, invest, invest
Investing can feel like a gamble.
I remember when I first started out. Stocks, bonds, real estate – it all seemed like a foreign language. But I was determined to learn, to master it and make my money work for me.
In my early 30s, I threw myself into the world of investing. I read books, attended seminars, and even sought advice from seasoned investors. It was a steep learning curve, but the effort was worth it.
I realized that the key to building wealth wasn’t just about socking away money in a savings account. It was about investing wisely and consistently.
Early retirees are often savvy investors. They understand the power of compound interest and the importance of diversifying their portfolios. They’re not afraid to take calculated risks and they always plan for the long term.
By investing in my 30s and 40s, I set myself up for financial success and moved closer to my goal of early retirement. Sure, there were bumps along the way, but those challenges only made me a smarter investor.
Investing isn’t always easy or straightforward, but with research and persistence, it can become one of your most powerful tools towards achieving early retirement.
3) Prioritize health
When we talk about early retirement, we often focus on the financial aspect. However, there’s another crucial factor that often gets overlooked – health.
Maintaining good health is a non-negotiable for early retirees. After all, what’s the point of having all the time in the world if you’re not healthy enough to enjoy it?
Interestingly, healthcare is the third-largest expense for most retirees, right after housing and transportation. So, prioritizing a healthy lifestyle not only ensures you’ll be able to enjoy your retirement to the fullest but also helps keep your medical expenses in check.
Early retirees usually make health a priority in their 30s and 40s. They invest time in regular exercise, maintaining a balanced diet, and regular check-ups. These habits not only keep them fit but also help them avoid hefty medical bills in the future.
Remember, your health is your wealth. So, don’t wait until retirement to start taking care of it.
4) Value experiences over possessions
In a world obsessed with material possessions, it can be hard to resist the allure of the latest gadgets, designer clothes, or luxury cars. But early retirees often take a different approach.
They value experiences over possessions. They’d rather invest in travel, learning, or quality time with loved ones than spend their money on flashy items that offer only momentary happiness.
This shift in mindset is not only beneficial for their wallets but also enriches their lives with unforgettable memories and personal growth.
Living a life filled with meaningful experiences rather than cluttered with unnecessary things might seem unconventional to some. But for those aiming for early retirement, it’s a step closer to their financial freedom and a life full of joy and fulfillment.
5) Set clear financial goals
I discovered early on that the journey to early retirement is not a sprint, but a marathon. It requires patience, persistence, and most importantly, clear financial goals.
In my 30s, I started setting specific financial targets. How much I wanted to save each month, what age I aimed to retire at, and what kind of lifestyle I envisioned for myself post-retirement.
These goals weren’t just numbers on a spreadsheet. They were my roadmap to financial independence. They guided my spending habits, influenced my investment decisions and kept me focused on the prize – early retirement.
I’ve found that early retirees are often meticulous planners. They know precisely where they want to be financially and they’re not afraid to do what it takes to get there.
Remember, a goal without a plan is just a wish. So, if you’re eyeing early retirement, start setting clear financial goals now. Trust me, your future self will thank you for it.
6) They continue to learn and grow
Retirement often brings to mind images of a laid-back lifestyle, devoid of the hustle and bustle of work life. But for early retirees, it’s a little different.
They view retirement not as an end, but as a new beginning. A chance to explore, learn, and grow in ways they couldn’t while they were busy working.
Even in their 30s and 40s, these individuals are often lifelong learners. They’re always seeking new knowledge, skills, or experiences that can enrich their lives. It’s not about climbing the corporate ladder anymore; it’s about personal growth and fulfillment.
This constant thirst for learning keeps them active, engaged, and excited about life even during retirement. So, while it may seem like they’ve left the workforce early, in many ways, their most exciting journey is just beginning.
7) They build multiple income streams
Dependence on a single source of income is a risky game, especially if you’re planning for early retirement.
Early retirees understand this risk well. That’s why they often diversify their income streams. They don’t rely solely on their day job to fund their retirement dreams.
In their 30s and 40s, these individuals might start side hustles, invest in rental properties, or even venture into freelancing or consulting. The idea is to create multiple sources of income that can generate cash flow even when they stop working their regular jobs.
This approach not only provides a safety net in case of job loss or financial downturns but also accelerates the journey to financial independence.
Remember, the more income streams you have, the less reliant you are on any one of them, and the closer you are to achieving your early retirement dream.
8) They start early
The most crucial step towards early retirement is just that – starting early.
The sooner you start saving and investing, the more time your money has to grow. It’s the magic of compound interest. The earlier you begin, the more powerful it becomes.
Early retirees understand this principle well. They don’t wait for the “right” time to start saving or investing. They make it a priority from their 30s, and often even before.
Remember, when it comes to early retirement, time is your biggest ally. So, don’t wait. Start now.
Embracing the journey
If you’ve made it this far, you’ve probably realized that the journey to early retirement isn’t about luck or striking it rich. It’s about thoughtful decisions, strategic planning, and consistent actions.
Early retirement isn’t just about financial independence. It’s about embracing a lifestyle that prioritizes health, experiences, and personal growth over material possessions. It’s about understanding your place in the economic world and harnessing your financial power to create the life you desire.
Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” This statement holds true for early retirees who leverage the power of time, discipline, and smart money habits to achieve their financial goals.
So as you reflect on these eight habits of early retirees, remember – it’s never too early or too late to start. Your journey to early retirement begins today. Embrace it.
