How to Retire Young and Rich!

Can you retire at the age of 35?

Looks like a challenge? One of my friends who earns 30 lakhs per annum ridiculed at the idea of retiring at 35. Some others politely said that they would work till 65 years as they find it difficult to manage the expenses in the current situation. Let’s check if it is really a herculean task to retire at the age of 35!

Jim Rogers is one of the most successful investors of our lifetimes. Starting out in his twenties with a mere $600 in his pocket, he “retired” at the age of 37 with more money than anyone could possibly spend. Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in many magazines including Time, The New York Times, and The Wall Street Journal.

J. D. Roth, the blogger who owns the getrichslowly.org retired at mid-thirties and guides how to retire early through his blog and books.

Let’s not forget Sachin Bansal who co-founded Flipkart.com sold his stakes of shares to Walmart for more than US $1 billion at the young age of 36.

You need not be an entrepreneur to retire at 30’s or 40’s. I have seen very ordinary people who have managed to create wealth retire at their mid-30’s.  Do you want to retire before hitting 40? We have compiled some basic strategies you can use to retire rich and young.

1. Save Aggressively:

If you want to retire happily, you have to cultivate the habit of saving. You have to systematically integrate saving into your life. Start saving now. You have to learn to live within your means and save as much as possible. Once this is done, the next question which comes to your mind will be: How much should I save to retire early? The most traditional advice would be to save ten to twenty percent of your income. But this is inadequate to retire at your 30’s. If you save only ten to twenty percent of your income, it’ll take you forty years to have enough accumulated wealth to retire. Instead, aim to save forty to fifty percent of your income when you are in your early 20’s. This should help you to retire in your mid 30’s.

2. Understanding the difference between the needs and wants.

Life will go on, even if you don’t get what you want. Every human being may have some of the same needs, but every human being will not have the same wants. Wants depend on a person’s environment, upbringing, ambitions, and desires. Most of you live your life from pay check to pay check because you do not know to differentiate between your needs and wants and eventually succumb to your wants. Many of your expenses are necessary—mortgage, insurance, food—but some of them are bought at the wrong time. Try ranking your discretionary spending items from the most important to the least important. 

3. Set meaningful goals:

Setting short, medium and long-term financial goals will add meaning to your savings. For example, a short-term goal of saving a portion of your income to buy a car which you plan to own in the next 2 years or a long-term goal of saving for financing your son’s higher education fifteen years later, Setting meaningful goal will act as a catalyst to your savings. Saving with a purpose creates an enthusiasm and energy to accomplish it.

4. Track your spending.

Much of the pay check-to-pay check spending is because you aren’t paying attention to your outflow of money. For two to four months document every purchase, whether it’s by credit card or cash. At the end of the period, you will be able to track where your money is going. Once you do this exercise you will be more conscious about controlling your spending habits.  This one process can fix most of your problems as 90% of us do not know our expense pattern. Mapping the spending pattern will help you fix your financial behaviour and increase your saving habits. This will help you acknowledge where the overspending is taking place and how to address it.

5. Budgeting:

Living without a budget is similar to driving a car in the dark without turning the headlights on. This first step to building a nest egg is budgeting. Once you know how to differentiate between needs and want you can easily fix your spending pattern. The most important discipline after budgeting is you have to adhere to it. Budgets will help you plan better, accelerate the process to achieve your goals and control unnecessary expenses.

6. Save in every way possible:

If you buy a cup of coffee every morning on the way to work, you must consider making coffee at home. If you are used to buying lunch at the office canteen, plan to prepare your own food and carry it to your office. This exercise, in fact, will make you both wealthy and healthy.

7. Create multiple streams of income:

With a single source of income, you may one day find yourself income-less. The legendary financial genius, Warren Buffett, cautions us and says “never rely on a single source of income.” He urges us to find ways to bring in money from a variety of sources. Warren focuses his income streams through investments. You may even take a part-time job to create more income. 

8. Surround yourself with like-minded people:

“You are the average of five people you spend the most time with” says Jim Rohn. You need people -- whether it’s co-founders, mentors, family or friends -- who will challenge you and make you better, thereby raising your average or helping you maintain a high energy level.

9. Learn Investing:

Once you have increased your savings rate and created multiple streams of income, you can turn your attention to growing your money. Saving money alone doesn't get you rich but investing can. Our friend John Jinkins who retired at the age of 35 explains: "At some point of time, your money does not grow much even if you put brakes on your spending. Sometimes it will be frustrating to live on a tight budget. At this juncture focusing on growing your nest egg will have a much more material impact on your net wealth than further reductions in your spending."

10. Optimize your taxes:

As your nest egg gets bigger, you should switch the focus to tax efficiency. If you know how to save on taxes legally, you can cut your retirement timeline by a few years. You may appoint an expert tax consultant to optimize your tax burden.

These are some of the key points which would help you to retire at the age of 40. We think it is not difficult to retire early if you have the dream, desire and discipline.