Can you achieve early retirement by changing your spending habits, regardless of income? Many personal finance experts say that it is less about what you make, and more about what percentage you save to make early retirement a reality.
The notion of ‘frugality’ is making a comeback and many families are altering their spending habits and making money-saving a priority. Those that aspire to be frugal strive to save at least 25 per cent of their income, with many wanting to save 50 per cent or more to feel financially secure.
What Does It Mean To Be Frugal?
- Frugality is about math, and about finding solutions. A good number of personal finance writers share the idea that consuming does not bring lasting happiness because no matter what you buy, you will naturally adapt to the new level of luxury and you will be no happier than before.
- The percentage of your income that you save will be directly correlated to how soon you will be able to retire or achieve whatever financial goal you have. It is not necessarily about how much you earn, but more about how much of it you can save.
- One writer suggests that you should strive to save 50 per cent of your income. If your expenses take up more than half of your pay, then you cannot afford it. “It” can be anything, from groceries, to gym memberships, to restaurant bills.
A Few Tips to Get You Closer to Early Retirement
- Identify Your Spending Habits – The best way to begin the process of changing spending habits is to first identify them. Over the span of a month, make note of what you spend and where. Note even the small things, like your morning cup of coffee. Write everything down and add up expenses at the end of the month. Do you think any of the amounts would surprise you?
- Do Not Think of Saving as a Sacrifice – For many, saving money is synonymous with sacrifice. If you instead think about the act of saving as simply shifting money from what may be a useless purchase to a more important cause, it will be easier to stay motivated. The more you think about what is really important to you and where you would prefer your money to go, the easier it will be to make the right changes.
- Trial and Error – Trying to change all your spending habits at once can be very overwhelming. Start with the spending that you already think you can live without and see how easy it is for you to change the habit. From there, experiment with the things you think you CANNOT live without. You may love going to the expensive gym or spa in town, or getting your daily coffee from the artisan café, but is it necessary for your happiness? Experiment with different things and decide what you can or cannot actually live without. Even the smallest changes can make a big impact in the long run.
- Track Your Progress – Keep track of how much money you save each month. Even if you feel like it is not a substantial amount – it is Hopefully, every month you will feel motivated to save a little more and change one more habit. By the end of the year, if you stick with it, you will have savings that you can be proud of.
Even the smallest changes can have an impact in the long run. Keep yourself motivated and think about the bigger picture. Remember, do not think of it as sacrifice, think of it as working towards a worthy goal!
If your goal happens to be upgrading or moving into your dream home, please feel free to call me at 416-921-1112 and I will do what I can to help make that happen for you!