Early retirement is a dream shared by many, but achieving it requires careful planning and significant lifestyle changes. Personal finance expert Dave Ramsey emphasizes the importance of evaluating your mortgage payments and developing a comprehensive plan to reach your goal.
Ramsey stresses that understanding your specific goals is crucial, as it will determine the size of the budget you need to plan for. Creating a mock retirement budget is essential, and it should include expenses such as utilities, insurance, medical costs, food, phone, internet, gas, and entertainment. Notably, mortgage payments should not be included, as the aim is to pay off your mortgage and other debts before retiring.
Evaluating your current financial situation is also vital, much like planning a road trip requires knowing your starting point and destination. In addition to paying off your mortgage early, Ramsey recommends exploring ways to lower your retirement budget, such as cutting back on expensive hobbies like travel. Increasing your income through part-time work or investments can also significantly boost your retirement savings.
Ramsey suggests utilizing a bridge account, a taxable investment account that helps bridge the gap between early retirement and when you can access your retirement accounts without penalty
Ramsey suggests utilizing a bridge account, a taxable investment account that helps bridge the gap between early retirement and when you can access your retirement accounts without penalty. Mutual funds are a good investment option for this account, and real estate can also be a viable choice if you’ve already paid off your primary residence and follow certain rules, such as paying in cash and seeking professional guidance.
Making significant lifestyle changes, including sacrifices like taking less expensive vacations, cutting grocery budgets, and finding ways to save on clothing, entertainment, dining out, and subscription services, is also essential. Lastly, consider where you want to live in retirement, as moving expenses and factors like cost of living and proximity to family should be taken into account.
Making significant lifestyle changes, including sacrifices like taking less expensive vacations, cutting grocery budgets, and finding ways to save on clothing, entertainment, dining out, and subscription services, is also essential.
By following these steps and maintaining a focused approach, early retirement can become a reality. Remember, your mortgage is a critical factor in achieving this goal, and paying it off early can make all the difference.
