Financial Freedom

Early Retirement: How To Retire At Age 40

Early retirement may not seem like something to be concerned about when you are young. The average retirement age in the world is between 60 and 65 years old. So you’ll work your entire life, and one day your boss will say, “Thank you so much. Your assistance is no longer required.” Then you’ll live the rest of your life on the money you’ve saved. It sounds simple until you realize it leaves little room for living your life. What about your dreams—the books you wish to read, the paintings you wish to create, the vacations you wish to take?

This is where the concept of early retirement comes from. In this post, we will plan how to achieve early retirement at the age of 40 and live a life of freedom. This is called financial freedom and this concept is introduced by Grant Sabitier

Calculate Your Net Worth

The first step is to calculate your own financial worth. Below is a sample format for a net worth tracking sheet. This sheet will help you calculate your own worth.

In the above table, first enter all of your assets in their respective rows and add them up. Similarly, enter all of your liabilities in their respective rows and add them up. Your net worth is calculated by subtracting your total liabilities from your total assets.
If this number is positive, it is a good sign that you have positive net worth, and if this number is negative, well, this strategy is applied to negative net worth as well.

Find your Financial Number for Early Retirement

Once you have an idea of your net worth, you have to calculate your financial number. Your financial number is the amount of money you will need to live for the rest of your life. In his book Financial Freedom, Grant Sabitier states the FIRE number. You must calculate how much your expenses are and write it down. All your bills, groceries, and all expenses were calculated. this will further help you to find your financial number

Below calculator will help you to find your Financial number

Start Saving Money and Clear your Debt

Now you know about your net worth, and you have calculated your financial number. Now you have a clear path. First thing, check if you have any debt. If you have any debts, first clear them off. a complete guide for how to get out of debt is available. In order to clear your debts, start saving 10% of your income immediately. and pay off all of your debts Either they are credit cards, home loans, or student loans.

Save for Rainy Day

Now that you’ve paid off all of your debts, start saving 10% of your income for rainy days or emergencies. This fund must have at least six months’ worth of your expenses as savings. Don’t put everything in the bank. as inflation will kill it. 30% of your savings should be in cash, with the remainder in a liquid asset such as a mutual fund or gold.

Start Investing

At this step, you must have paid off all of your debts and have 6-month expenses in your fund. Start the investment immediately after the completion of the above steps. Stocks are a cheaper option. A mutual fund is another option. The following are some investment opportunities that you can begin with as little as 5000 PKR (about $25). I am not entering non-Islamic ventures of investments

Plan return so that it can pay for your expsnses. your investment returns must be more than your expenses.

Financial Freedom for Early Retirement

Become financially free by increasing your income streams. Passive income streams can increase your wealth. and become financially free. Purchase assets from your investments that increase your wealth, like stocks with dividends. houses on rent. Once these investment returns are enough to cover all of your expenses, you are financially free. Below Points has to be met for financially free

  1. Your Asset return must e more than your expenses
  2. you have emergency fund of at least 2 years

Below video will further clear your concept by Business insider

How much money you need to retire at 40


if i conclude the article, By following below steps you can get out of any debt and be financially free and goal of Early retirement can be achived

  1. Calulate your net worth
  2. Calculate your Financial Number
  3. Start saving 10% from your income every month – if it is not possible than increase your income by side hustles and reduce your expenses. This is the most important rule. and you have to follow in all circumstances.
  4. Start to pay off your debts from saved income from step 2. Negotiate with your Debtor to give you time and consider monthly payments
  5. Once debt is paid off. Start saving for emergency funds. First level is at least 6 months of your expenses. 2nd level is 1 year and final level is saving of two years of expenses. keep this fund in liquid form (30% cash, 70% in easily liquiadable funds)
  6. Once you have saved six months expenses. Now start investing in different ventures.
  7. Make Multiple income streams to streamline your income. incase you lose your primary source.
  8. Automate the income streams so that you can be financially free to retire.

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