While researching my CBO column last week on early retirement, I contacted Tim Stobbs, author of a blog called Canadian Dream: Free at 45. Hes been writing about early retirementfor quite awhile, so I asked if he had any advice to pass on. Space constraints prevented me from including his input in the column, so I thought could pass it onhere. In a nutshell, the advice boiled down to:
1) Stop fantasizing about it and set up a concrete plan. 2) Get serious about living below your means. 3) As your income rises, start saving more than the proverbial 10% of income.
Heres Tim, in his own words:
Move out of the land of fantasy and start planning what exactly you want to do in retirement. I find too many people dont define what they want to do in retirement and as such find it impossible to do a meaningful estimate of their spending which is the key to an early retirement. You might even find you dont need to wait until you are retired to start working on some of your dreams like some trips or hobbies (like writing, painting or even a new sport).
Then start looking at your current spending and insist that it makes you happy. Track your spending and reduce anything that doesnt bring you happiness. For example, consider a smaller house if you never spend any time there or skip buying books is you only read them once (use the library instead). Or cut back on your lunches out in order to eat a nicer supper out once a week. Dont deprive yourself entirely or you are never going to keep up the savings rate you need to get to early retirement.
When it comes to the actual savings forget the 10% rule. You are going to need to consider a much higher amount depending on your income. Saving 50% of your take home pay at $150,000 a year is a lot easier than saving 15% at $50,000. So as your income goes up control your expenses and try to save the majority of your raises.