You can’t just sit there and hope to have enough money to be retired one day. Social security might not last, no one else is going to save you, and the rise of automation might lead to mass unemployment in just a few short decades. Get yourself in gear and ensure your financial future. Once you get the basics down, instead of retiring at 65, there’s no reason you can’t retire in your 20s and 30s if you start out early.
These 5 tips are just the basics. If you want to get your personal finances on track to retire early, take this free course below. It’s incredibly packed with information and free, with course content dripped out one day at a time. 20,000+ words and an incredible spreadsheet will get you on track to retire years earlier. Sign up below if you haven’t already.
How much time do you spend each week partying and watching television? Spend just a few hours getting your financial life in order and invest in yourself.
1). Get An Emergency Fund In A High Yield Savings Account
Everyone needs an emergency fund. Things happen. 2008 happened. Firms lay off people all the time. People get appendicitis, break an arm or leg, get into a car accident, or some other serious health condition — it’s not your fault, it’s just random. What happens if your car breaks down and there’s an expensive part? Where’s your emergency fund? Start one now!
So where do you need to store your emergency fund? In the highest-yielding savings account! What does your current savings account return? If you’re like most Americans, it returns almost $0 because the national average return for savings accounts is .06%. Nope, not a typo, that’s 6/100s of a percent. Tired of getting underpaid on your savings account? I was. I currently get paid 1.85% interest on my savings account with CIT bank. Tired of the overdraft fees/monthly minimums and other nonsense with your bank? Go with CIT.
CIT Bank offers 1.85% interest, which has a higher interest rate for a savings account than any other bank. CIT bank doesn’t have any fees, and the minimum to open an account is only $100. Get your butt in gear and get that emergency fund in place this year.
The different between a high-yield savings account and one from a big brick-and-mortar bank (Chase, BOA, WF, etc) is hundred of dollars a year. Make sure you’re earning the most interest you can.
Marcus by GS and Barclays both offer 1.5%, and Synchrony Bank and Amex both offer 1.45%. Yes, I spent a few hours checking because it’s worth it to me to get the best return possible.
2). Get Your Basic Retirement Accounts In Order: 401k and IRA
Make sure you’re at least contributing up to your 401k match. It’s free money! If you can, contribute up to the maximum. For 2018, the maximum is $18,500 if you’re under 50. For every dollar you contribute, it reduces your taxable income. Paying taxes way later in life is much better than paying them today! If you’ve run out of room in your corporate 401k? Start a side hustle and put up to $54,500 in there.
Need a list of ideas? Here’s 150+ Smart Side Hustles and Ways to Make Money. I’m sure you’ll find some way to make money on this list.
Once you’re done contributing to your 401k, open up an IRA to fund $5,500 each year. For IRAs, you need to pay taxes up front, but there won’t be any taxes later down the road.
Check out this free 401k analyzer to make sure you’re not paying too many fees, invested in the right products, etc.
3). Fund your HSA
Certain insurance plans that are classified as High Deductible Health Plans (HDHP) are allowed a Health Savings Account (HSA). They are arguably the best kind of tax-advantaged retirement accounts because they are triple tax-advantaged. You put in money pre-tax, it grows pre-tax, and when you take the money out once retired, it is also is not taxed if used for medical purposes. The contribution limits for a single person are $3,450 per year and for families they are $6,900 a year.
Note: The best way to utilize this is to save all your receipts and get them reimbursed when you retire. That way you can have your HSA fund grow tax-free for decades and get that compound interest!
4). Track Your Financial Life
You need to track your financial life if you want to retire early or be wealthy. You may not realize what you’re spending your money on and where it goes. How much does that coffee cost you – would you believe half a million dollars by the time you retire? Did you know all the clothes you buy will allow you to retire 3 years earlier? Did you know you can save thousands per year by cooking your own food instead of eating out all the time? There are so many ways to optimize your spending and saving, but if you’re not tracking and analyzing it, then you’re just guessing and hoping.
Personal Capital: I use this to track my Net Worth and expenses. It makes it easy to link up all your assets and liabilities. No more spreadsheets, Personal Capital has automated all that for you! They also have a cool early retirement calculator that you can play with!
Get a free credit score to make sure you’re on track. I use this to track what happens when I open new credit cards and it’s a great place to see if someone has stolen your identity. Stop paying for those credit reports and just get it free!
Pros only for Credit Sesame:
- $50,000 of identity left insurance free (with all the online hacks recently, this is something I absolutely love)
- Free searching of unclaimed money in government databases
5). Get An Investment Plan & Start Investing
You can get a free investment plan here with Ellevest. Click the “Get Started” and once you enter all your information, which takes less than 3 minutes, your investment plan comes out for free, and you can play around with the goal planner calculator. The calculator is perfect for early retirement calculations and it saves your info.
You can easily calculate the below:
- Amount you need to save monthly for a down payment on a house
- How much you need for an emergency fund
- How much you need for maternity/paternity leave of 9 months
- How much you need to save per month for early retirement
- Much more
For my friends who aren’t as into spreadsheets, logging into Ellevest makes it easier to plan for their financial future.
If you’re willing to put in the additional work and invest your own portfolio, check out this article for a DIY approach. If you’re not ready to DIY it yourself, invest with a robo-advisor like Ellevest.
Get your financial life in order in these 5 easy steps.
Olivia worked in finance and wants you to learn the secrets of financial independence. She believes there are so many ways to monetize your life and make money doing the things you're already doing because so many companies offer free money.
The average savings account rate is 0.1%. The big banks have incredibly low savings accounts rates. CIT Bank offers a 1.75% savings account. You can open an account with just $100 and no monthly fees or charge . Tired of being charged fees and getting peanuts in interest at your current bank? Open a CIT Bank savings account in less than 15 minutes online.
If you have a car, Rideshare apps allow you to pick a direction you want to go twice a day, so you can get extra money going somewhere you were driving to anyway at least twice a day. Get a $300 sign-up bonus with Lyft.
One of my favorite ways ways of monetizing my life is via credit card bonuses with cards that give you cashback or rewards. Check out our review of the Chase Sapphire cards, which give you at least $500 in cash or $625 in travel credit.