Early retirement is a trend that more and more are pursuing regardless of their working model, social status or personal wealth. With an increase in the WFH (work from home) and WFA (work from abroad) format, achieving financial independence and retiring early is now more than a pipe dream.
Sam Dogen, who worked in investment banking for 13 years before starting Financial Samurai, a personal finance website, wrote about how he did it for CNBC. At 34 he quit his banking job in 2012 and retired from full-time work. Dogen and his wife had a combined net worth of about $3m, and live off a passive income of around $80,000.
1. You risk running out of money if you retire young
Early retirement takes years and years of planning, discipline, saving and investing. To make sure we could survive living off $80,000, we experimented with living off of much less before actually retiring.
Lastly, we had an emergency plan. If money ever gets tight, we’ll take on as much freelance work as possible or sell our San Francisco home and move to a more affordable area.
2. You will have to cut back on spending — and you won’t like it
You will soon find that you don’t need much money at all to live off.
During the first two years of retirement, my annual income decreased by nearly 80%. But what surprised me the most was that I was spending 30% less than I anticipated.
Food is a lot cheaper when you no longer work in an expensive downtown area. It’s free to read all the books you want at the local library.
3. You will feel permanently happier
For months, I was weighed down by thoughts of uncertainty. Was retiring early a mistake? Did I make the wrong decision? It took me two years to get rid of my doubts.
An important key is to find new things to look forward to every day. But there will always be lingering anxieties, some of which you can’t escape.
4. You will be bored out of your mind
Yes, at first. It took me two years to develop a daily routine that kept me productive, engaged and happy. Part of that was writing my finance website, that, not only generated a surprising amount of extra income, but it was also a cathartic way of relieving any uncertainties on my mind.
During my first year of retirement, I often wondered that my boss and colleagues would mi
5. You will lose your identity and get depressed
ss my expertise. I stopped feeling motivated to achieve great wins and fell into a deep depression. But after a lot of soul-searching I’m no longer ashamed to say “I’m not working” each time someone asks what I do for a living.
Instead, I proudly tell them that “I’m a high school tennis coach for three months a year” or “a proud husband and father of two.”
6. You’ll die younger, due to laziness and a loss of purpose
Not true. When I was still working, I had all the common problems: Plantar fasciitis (inflammation of the fibrous tissue), a weakened immune system (due to immense work stress), chronic lower back pain (from sitting all day), teeth grinding (also from stress).
All those issues miraculously went away once I retired. I firmly believe that stress is one of main causes for many of our biggest health problems.
Whether you’re planning to retire early or not, don’t let investing mistakes derail your plans. Choose a reliable stock broker and only invest money you can afford to lose.