5 Essential Habits of Early Retirees

Adopting these strategies could allow you to retire years ahead of schedule.

5 Essential Habits of Early Retirees
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By David Ning

The idea of retiring early can seem so far-fetched you've never considered trying to get there. Still, this select group of people is worth emulating in many ways, even if kicking back early isn't on your radar. Here are a few traits of early retirees you should consider adopting:

They save a lot. There are an exceptionally lucky few who inherit their wealth, but the vast majority of early retirees spend years saving to increase their stash, plugging away towards their goal until they've saved enough to buy their freedom. While you may not care to retire before everybody else, having a big cushion can give you the necessary ammo to take significant risks that can pay off big time. Perhaps it's a new job opportunity with a better career path that requires a short-term pay cut, or taking time off to obtain additional certifications to significantly lift your salary trajectory for the rest of your life. Whatever it is you want to do, having the comfort of not running out of money as soon as the paycheck stops offers choices.

They understand their spending habits. Talk to enough people who are financially independent and you'll realize they have a pretty firm grasp of how much they spend. After all, how could anyone who's not a billionaire know they can afford their lifestyle indefinitely unless they know how much they are spending? Yet, how many people know where their money is going? The good news is that once you start tracking your expenses, you are likely to find many areas to cut spending without affecting your quality of life.

They have an investment plan. No one is going to live off their savings for 40 to 50 years with all their money hidden under a mattress because inflation is relentlessly chipping away at their wealth.
While not every early retiree is an expert in finance, they've all had to come up with a way to finance their lifestyle using their portfolio as the primary source of funds and deal with market volatility along the way. By learning about investing, you'll be able to increase your wealth much faster than if you just stick everything in a savings account thinking that's the safest place to put your money.

They pursue happiness instead of more income. It's obvious that quitting the rat race early is leaving salary on the table, but that's fine with those who retire early because they value freedom much more than a higher account balance. Unfortunately, many people in our consumer society do just the opposite, slaving away for long hours while sacrificing their health, family ties and happiness. The new smartphones sure are nice, but are they more important than all the other things you could be doing with your time?

They are optimistic. With the heavy reliance on investment returns to sustain a long retirement, you have to put quite a bit of faith in the stock market to leave your job. Early retirees are willing to make the leap, while pessimists who fear running out of money might work longer in order to save more and shorten the period of retirement they need to finance. But the power of optimism goes way beyond expecting lucrative investment returns. A positive attitude will help motivate you, which can lead to better opportunities, more promotions and ultimately a better retirement.

Visit MoneyNing.com for more personal finance discussions. This site also helps readers decide whether a zero percent balance transfer card is worth signing up for and keeps a good list of helpful promotion codes.

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Good information about managing money. Read the FREE chapter, "Money Talks" in the book (SWEET SUCCESS by Barry) on Amazon.com or BN.com.

April 17 2014 at 9:06 PM Report abuse rate up rate down Reply

The stock market is oversold and it is profit taking time. You will have to wait till the next recession and buy in but 50% of the stocks you might pick will not fare well mostly due to changing technology and social changes. Save anywhere you can in any safe place and you will do ok. When that iphone 10 comes out forget it unless your company pays for it. maintain your old car, paint the house yourself, etc...you might make it. Retirement is expensive! Good luck !

March 15 2014 at 10:36 AM Report abuse +1 rate up rate down Reply

My recommendation is to be DEBT FREE as soon as possible. We paid off mortgage long before we turned 50. So when our grand-daughter was born when I was 53, I quit working to babysit her. I'm also able to spend a lot of time with my mom who is in a nursing home. My hubby then retired a couple years later, and we couldn't be happier.

I watched my dad retire at age 62....and die at age 68. Time is WAY more important than money. I wouldn't trade my time with my grand-daughter for anything. People, the main thing is just STAY OUT OF DEBT. LIVE BELOW YOUR MEANS. You'll be much happier in the long run! Stuff doesn't matter. People do.

March 14 2014 at 7:53 PM Report abuse +2 rate up rate down Reply

The first rule of financial planning is "pay yourself first." This means you systematically set aside a certain amount of your income (paycheck) for savings and more importantly investments for the future. The earlier you start doing this, the better off you'll be. And, this is before you spend it all on unnecessary BS like cars and other toys you can't afford. The second axiom is that "people don't plan to fail, they fail to plan." The stock market has always gone up and down. For those of you who are skeptics and feel the market is that "Great Evil Casino," take a look where it was in the 1950's and where it is today. For those of you who don't trust the stock market, I wish you luck with your retirement aspirations, you'll need more than luck to be able to retire and will probably be playing catch up when its too late and you're too old. At a minimum, some of you folks better be working where the job provides a pension. Social security was never meant to be the sole source of anyone's retirement income. Problem is, most of those pensions (aka defined benefit plans) have gone the way of the Dodo Bird. If you don't like the stock market, maybe real estate is your thing? Regardless, you have to accumulate money to make money and to invest in things like real estate.Taxable bank interest rates are so low and with inflation running about 3 percent a year....you are losing ground putting ALL your money in a bank. With banks you're losing because of taxes, inflation and terrible interest rates at present.. Banks are for working capital and emergency funds, only.

March 14 2014 at 7:27 PM Report abuse +1 rate up rate down Reply

What's really implied in this article is the value of thrift, i.e. having a regular savings plan and living BELOW your means, not above it. The sad truth is a large percentage of baby-boomers have accumulated too much debt because they refused to lower their standard of living.
Whay should they? After all, who knows how long anyone will live, so enjoy life today, the hell with tomorrow. Just don't complain about being part of the impoverished elderly class if you didn't believe in being thrifty.

March 14 2014 at 3:22 PM Report abuse +2 rate up rate down Reply

I retired at 53 from driving semi-trailers. With the change in lifestyle alone, I lost over 30 lbs. I eat better and exercise now. I'm happier and healthier than ever.
I know too many people that worked themselves to death and never got to enjoy any of plans they worked so hard for.
Retirement - I highly recommend it.

March 14 2014 at 9:01 AM Report abuse +13 rate up rate down Reply
1 reply to Kevin's comment

You bet, so many of my friends have died since I retired at 42 years of age. How, investing every month, from the day I carried my first golf bag at age 12, then pumping gas through high school, followed by my $212.00 monthly and $54.00 combat pay in the military. After which, college, still investing, and finally the workforce. and always in dividend producing stocks.

March 14 2014 at 9:52 AM Report abuse +7 rate up rate down Reply