My goal from the start was to retire at 45. I knew it would take a combination of financial disciplines and solid income streams in addition to my traditional job.
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Here’s what I did to retire at 45.
The FIRE Approach
If your goal is to retire early, you’ve probably heard of FIRE, or financial independence, retire early. I used this as my basic approach to spending, but this must be a life you truly want for yourself, as it requires a great deal of motivation and effort. FIRE is marked by living frugally, both spending little and saving a lot, along with making the right investments.
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To achieve this significantly earlier age of retirement, your goal is to save around 50% to 70% of your annual income. Moreover, your income probably has to be above $100,000. While the methods of FIRE can certainly benefit those with lower incomes, allowing them to retire earlier than 65, the goal of 45 means you’ll need quite a bit of income. This is because you need to prepare for 40-plus years as a retiree.
The kind of frugality that FIRE calls for is not for the faint of heart. You’ll need to commit to going out as infrequently as possible, avoiding movies, restaurants and other activities. You’ll also need to live in the smallest of spaces, possibly with a roommate or two, so that you can save on your housing expenses.
My 9-5
I began with my primary source of income. I had a traditional job, so I needed to be slightly more aggressive about getting each promotion or raise.
I also made the switch to remote work so that I could save the costs of car payments, gas and parking.
Side Hustles
At first, I had a solid mix of working my standard 9-5 while hustling on the weekends during the time others would probably be relaxing. I combined a gig with Uber and another with food delivery while also working to build an online coaching business for people starting out in my profession.
When I had enough clients to recruit people to work with some of them, my business really took off. Even when it outearned my traditional job, I kept it as a side hustle so that I could bank all the profits.
Investments
You want to make as many smart investments as you can in order to put away as much money as possible. Retiring so early requires you to have a substantial nest egg that will stand the test of time. Because I chose to retire at 45, I wasn’t going to be able to take on nearly as much risk as other young investors who aimed to retire in their 60s.
Given the shorter time frame, I focused on having a diverse portfolio, marked by low risk and low fees. (Fees were also more of a detriment due to the shorter time frame — the amount they add up to presented more of a roadblock.)
Your unique economic situation dictates your expenses, but the general guideline I used was having my savings at 30 times my yearly expenses. Now that I’m retired, I withdraw around 4% from my savings each year.
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This article originally appeared on GOBankingRates.com: I Retired at 45: Here Were My 3 Streams of Income
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