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How to Plan Your Personal Finances to Save For an Early Retirement

Early retirement is everyone’s dream, but is it practically achievable? The answer is yes. With proper planning of your personal finances, you can attain financial independence at an early age.

Just because you feel financially self-sufficient now doesn’t mean that the same will be the case throughout your retirement. So, don’t be naïve and jump into early retirement without a plan. If you wish to pursue your dream of early retirement, you’ll need some critical thinking along with a great deal of commitment.

I won’t lie to you; there are no shortcuts or fastest way to improve your money situation. Perhaps, you are lucky enough to find a magic lamp and get your three wishes, simply ask the genie for early retirement.

If you have pulled your head out of the fairytales, maybe be we can start discussing ways to manage your finances, shall we?

Minimize your expenses buy not spending on unnecessary things

You can’t just go out for an expensive dinner every night and expect an early retirement. If you wish to save more, start by lowering your expenses. You probably have to make some sacrifices in order to enjoy your future.

Apart from this, start making and committing to a budget. Your budget will allow you to establish a spending plan that will help you reach your financial goals more efficiently. Without a plan, you might end up spending on nonessentials, and your dream of retiring at 40 will suffer.

Wipeout your debt to save more than you need

Eliminating high-yield debt is the key. The most common thing among early retirees is that they were successful in maintaining a low debt-to-income ratio.

Plus, debt can be a massive hurdle in achieving your financial goals. That is why you need to design a debt elimination plan to wipe out your loans more rapidly. Once you are debt-free, try to keep it that way for a longer run. Avoid using your credit card for impulse buying.

Also, try selling all the unwanted items lying around your house for some extra cash that will help you pay off your debt more quickly.

How Much to Save?

Always remember the 80 percent rule. For early retirement, all you have to do is to try to replace about 80% of your current income. This should be your target. This will make sure that the money won’t stop coming even when you’ve quit your job. If you are successful in replacing this amount, you can expect the same contented lifestyle after retiring too.

In addition, you should also have an idea about your post-retirement expenses. The easiest way to calculate your annual retirement expenses is to increase your current yearly expenditure by up to 20 percent. This will take care of any risk involved.

Start Investing

You can’t think of retiring early until you know how to invest. You can save a ton of money, but you should know how to make money on money. This can be done through investing. Since you are planning for early financial independence, you have a shorter time to make money. Realistically speaking, it isn’t very easy to earn enough salary that will be sufficient for your post-retirement lifestyle. It would be best if you had a lot more. That is why you should not only learn to save but also invest that money.

For best results, invest in a medium-risk portfolio with long-term growth. Such funds are quite inexpensive, and the element of growth guarantees excellent returns in the future.

Take a Side Hustle to earn extra money

Yes, we know that you are already working hard on the day job, but you have a very ambitious goal of early retirement, and you can’t expect to realize it without hustling. You can easily make a few hundred dollars while working some extra hours on the weekends. There are many options – you can babysit, drive an uber, participate in focus groups, write a blog, or make deliveries.


Eliminating your debt, minimizing your expenses, saving, and investing money sound very difficult. However, it is totally doable, and if you believe in yourself and show commitment, you might be able to retire early.

Good Luck!

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