5 Money Moves You Should Avoid If You Are Aiming For An Early Retirement

Posted on Wednesday, December 20th, 2017 | By IndusInd Bank

Retiring early is a dream garnered by most individuals, but not everyone is able to realize this dream. It is not a difficult goal to achieve as long as you are focused and smart with the decisions you take.

Myth: Most of us consider retirement as a stage in life where an individual decides to hang his boots and call it a day as far his career is concerned.

However many financial experts rightly consider retirement as a stage in life wherein regular income for a bread earner may be hampered due to death, disability or disease.

It therefore prudent to not only ensure that an individual is able to manage funds in a manner that future expenses can be covered, but also protect the future expenses/ financial milestones through a comprehensive protection solution mitigating the risk of death, disability or disease which my hamper future income and lifestyle.

Many financial experts would ask one simple question that revolves around retirement: “When do you tend to spend more – On a Weekday or a Weekend?”

The answer 9 out of 10 times is : Weekend !

I am sure everyone would agree that post retirement every day is a weekend!

The bigger picture here is that we tend to spend more when we have time to for ourselves, therefore it is imperative that while considering our future expenses we consider these behavioral aspects as well.

The most challenging, and also most exciting, aspect about seeking an early retirement is that there is less time to accumulate wealth and more time to enjoy it. So it is essential to plan your moves carefully and manage your finances smartly in order to reap benefits in the golden years of life. A few errors in judgment could very easily disrupt all your plans of an early retirement. To ensure that does not happen and your dreams become a reality, here are some moves you should judiciously avoid –

1. Not creating a financial plan

Unless you have a proper formula to achieve your financial goals, you probably will not be successful. Though it is not a difficult path to pursue, you cannot set off on the journey randomly and expect results. Time taken to formulate a written plan which chalks out the roadmap is an investment in your future. This will help you manage money more efficiently, minimise the effort you might waste and provide the focus and direction required to meet your goals.

2. Big loans

An increased income brings with it the urge to spend more and live a more exorbitant life. However, indulging in these luxuries at an early stage in your work life would usually mean that you take a loan and pay instalments for a large part of your remaining work life and save next to nothing for retirement. Taking various loans to purchase a house, big cars, gadgets and other luxuries serves as a big hurdle on the road to early retirement and must be avoided.

3. Not taking insurance

Smart planning is not all about investing money in the right places and saving a certain amount of money from your income. It is also necessary to protect the money you have worked so hard to accumulate. One accident or hospitalization has the potential to dent your retirement kitty substantially. You may ignore insurance as being an unnecessary expenditure, but paying a small premium an individual mitigates the risk of death,disability or disease which may have a catastrophic effect on the planning designed towards various financial objectives including having a prudent retired life.

4. Starting investments late

Early retirement is all about making the most of your time. The more time you give your money to grow, the greater is the wealth that your money can generate. The compounding effect of wealth creation is such that a few years of procrastination could make a massive difference to your retirement funds. People tend to feel the need to save for retirement at a late stage in their work life, which is an attitude you cannot have if you plan to retire early. Ideally, you should start investing your money from the very first paycheque you receive.

5. Being reckless with retirement goals

Using the money you have saved for your retirement to fulfil other desires will not allow you to retire with financial security. Having funds at your disposal through your retired life is a need that cannot be ignored. Compared to this need, certain wants/desires could be postponed till the essentials are fulfilled. You must not drift from your direction and be reckless about the goals you set out to achieve.