This started out as a status update for Facebook but I decided to turn it into a blog entry when it got so long.
I don’t think I’m the best person to give financial advise but I was told by a few people maybe I should share some of the ways I’ve saved for my “early” retirement. If it helps anyone then that would be great. If it just goes in one ear and out the other at least I know I put it out there. Everything I’m about to say has already been said by a million and one people before. Wish I had started as soon as I began earning a paycheck…but hear goes.
1. Save at least 10% of everything you earn (even though it’s just $10)
2. If your employer offers a 401k plan or a Thrift Savings Plan (TSP), contribute at least 10% whether or not they match it. If you feel you cannot start at 10%, start at 3% and increase it by 1% every year until you get to at least 10%.
3. Contribute the maximum allowable to a Roth IRA annually.
4. Pay with cash as much as possible. If you do pay with credit cards to get the rewards (travel miles, cash back etc.,) pay off the balance when the bill arrives.
5. Save up for big purchases.
6. Build an emergency fund of at least three months living expenses.
7. If you have more money to invest after you’ve done all of that and taken care of your regular living expenses open a separate investment portfolio than your retirement portfolio (Roth IRA, TSP etc.,). You can always sell some stocks or mutual funds if you need to in case of an emergency and because you shouldn’t touch those until you are 59 & 1/2 years old. Also you can only contribute earned income to those types of accounts (if you stop earning money you will no longer be able to add to those accounts). These accounts will still keep working for you, earning dividends etc., you just won’t be able to add to them.
8. Increase the deductible on your car, home owners, rental insurance etc., and keep that amount in a liquid account in case you need it. It is not worth paying all that extra premium for a $200 deductible.