Want to retire early? 5 strategies to know ahead of the new year

Many people strive to retire early in order to have more time for leisure activities and to pursue their personal interests. However, there might be several reasons why people want to retire early, depending on their circumstances and priorities. It is all about selecting the right financial strategies to set up a reliable source of income throughout the retired life.

These top 5 financial strategies can help you better plan for early retirement. Why not implement these as your new year’s resolutions?

1) Automate your investments

The earlier you want to retire, the more part of your income must be invested. At the pace with which inflation is rising, it is always a good idea to stick to your basics and invest more. It can help you leverage the power of compounding to a great extent.

One of the best ways to do this is to automate your savings so that you will not miss adding funds to your retirement account. It would help if you always choose your investments wisely, aligning with your risk tolerance and investment horizon.

Use the 100 minus age rule. For instance, if you are in your 20s, the equity asset allocation in your portfolio must be 80%. So, as you grow older, the proposition of equity correspondingly reduces.

2) Stay away from debt

Debts can hinder your retirement efforts towards saving money. If you are stuck with debt, you may not have enough money to support yourself post-retirement.

Secondly, it can also add a lot of stress, making it difficult to enjoy after retirement. The basic budgeting rule of 30:30:30:10 can help you better save up for your retirement early in life. The rule means that your monthly income should be divided into 30% for housing needs such as rent or home loan EMI, 30% for your necessities like groceries, utilities, and fuel, 30% for your savings and investments and 10% for discretionary expenses. This rule helps you save in a disciplined manner.

3) Have the right health insurance cover

How much ever you plan to save for the future, you might fall short of funds when situations turn uncertain. So, it is always a good idea to ensure that you have sufficient corpus to cover your medical expenses.

Health insurance can also give you better access to regular check-up and preventive care, which can help you balance your health and provide you with access to some of the best doctors. This kind of corpus is vital for protecting yourself and your family from financial hardship, maintaining your health, and giving you peace of mind.

4) Create a budget and stick to it

Keeping an eye on your expenses is crucial to managing money. Tracking your expenses can help you identify areas where you may be able to cut back. This way, you can avoid overhead spending to cover your bills and save for retirement better. Some tips for keeping an eye on your expenses are:
- Create a budget and stick to it
- Use a spending tracker to analyse your expenses better
- Set spending limits to make sure you stick to your budget

5) Increase your passive income

If you want to retire early, the foremost thing to do is to build a passive income stream. There are many ways you could earn passive income. Take up a freelancing project, invest in assets that pay some sort of dividends.

If you are unsure where to begin with your retirement planning, these strategies can help you with some guidance. However, using a retirement planning calculator to determine your specific needs and create a personalised plan is always a good idea.

These strategies are flexible enough to modify and adapt according to your needs.

(The author is the chief executive officer and co-founder of Mudrex).