I Retired at 50: How I Budgeted in My 30s and 40s To Get There
Long before the FIRE — financial independence, retire early — movement, people have sought to retire early. Not only does early retirement give people the time they need to pursue their interests and hobbies, but it also presents an ease in life that comes from not having to work every day.
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But for some, early retirement doesn’t quite stick. Many early retirees end up pursuing new ventures or continuing to work after their original retirement. The reasons for this are numerous, ranging from financial to emotional to the drive to do something more.
Whatever the case may be, if the goal is to retire early, it’s important to have a budget in place. GOBankingRates spoke with Tom Caldwell, who is currently the chief financial officer at Autoinfu, about how he budgeted in his 30s and 40s so that he could retire early.
Starting With Aggressive Savings and Investments
“I can attest to the importance of strategic financial planning and disciplined budgeting throughout my 30s and 40s,” Caldwell said. “My budget during my 30s and 40s was focused on maximizing savings while balancing lifestyle expenses.”
So, what did that look like? It all started with a keen focus on saving and investing.
“In my 30s, I consciously tried to save aggressively and invest wisely,” he said. “I aimed for a savings rate of at least 30% of my income. This included contributions to retirement accounts, emergency savings, and investments.”
He prioritized his retirement accounts first, but he didn’t stop there.
“I maxed out contributions to tax-advantaged retirement accounts such as 401(k)s and IRAs,” he said. “Additionally, I diversified my investments across stocks, bonds, and real estate to spread risk and maximize potential returns.”
Since he started early, he was able to take advantage of compound interest and give his retirement savings an even greater boost.
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Living Below His Means
Saving and investing 30% of one’s income is no easy feat. For Caldwell, like many others who retire early, it entailed curtailing his spending and living below his means.
“Throughout my 30s and 40s, I prioritized living below my means. I maintained a modest lifestyle, avoiding unnecessary luxuries and focusing on what brought value and happiness to my life,” he said. “This allowed me to save a substantial portion of my income and allocate it towards retirement accounts and investment opportunities.”
He further explained that he kept fixed expenses like mortgage payments, insurance premiums, and utilities low using two main methods. The first was that he would periodically reassess these expenses to make sure they fit into his budget and savings goals. The second was to negotiate for better rates whenever he could.
But living below his means didn’t keep him from spending some money on things he enjoyed. It just meant he was careful with how he went about it.
“While I allowed for some discretionary spending on travel, dining out, and hobbies, I kept these expenses within a predetermined budget,” Caldwell said. “I prioritized experiences over material possessions, which helped keep costs in check.”
Taking on Additional Income Sources
With such aggressive savings and investment goals, sometimes one source of income isn’t enough. For Caldwell, he found a way to combat this by taking on side hustles and building passive income.
“I explored various side hustles and passive income streams to supplement my primary income,” he said. “Whether it was freelance work, rental properties, or dividend-paying investments, these additional sources of income provided a buffer and accelerated my path to early retirement.”
Continuing With Personal Development
There’s something to be said for continuous learning. If you want to retire early like Caldwell, one of your biggest focuses should be your own financial education. This is what’s helped him and so many other early retirees get to where they are.
“I dedicated time to educating myself about personal finance, investment strategies, and retirement planning,” he said. “I could optimize my financial portfolio and adjust strategy as needed over the years by staying informed and making informed decisions.”
Things change rapidly in the world of finance. From new tax laws to investment opportunities, keeping abreast of these changes can help you stay ahead — and even achieve early retirement if that’s your goal.
Investing More Aggressively Would Have Been Better
Hindsight really is 20/20. Looking back on his journey, Caldwell shared some areas in which he would have done things differently. One of the big ones was that he would have liked to invest more aggressively early on.
“While I started investing in my 20s, I could have been more aggressive with my investment approach,” he said. “Time is a powerful ally in investing, and starting even earlier can lead to significant growth in wealth.”
Depending on how he went about it, it’s possible he would have retired even earlier — or else made things a little easier on himself later on.
Saving More
Along with more aggressive investing, Caldwell said he could have increased his savings rate to beyond 30% as that would have also helped him along the path to early retirement.
“While maintaining a solid savings rate, I could have pushed myself to save even more aggressively in my earlier years,” he said. “Every extra dollar saved and invested compounds over time, so increasing my savings rate could have accelerated my journey to early retirement.”
Building More Income Streams
Having more diversified income streams never hurts. More sources of income coming in means more stability and more savings or investment potential.
But even those with a great financial strategy and budget — like Caldwell — can still look back and wish they’d done things a bit differently.
“Exploring side hustles and passive income streams was crucial to my early retirement success,” Caldwell said. “I wish I had diversified my income sources earlier in my career, as this can provide stability and additional funds for savings and investments.”
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This article originally appeared on GOBankingRates.com: I Retired at 50: How I Budgeted in My 30s and 40s To Get There
