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- I finally took retirement planning seriously in my thirties and opened a SEP IRA.
- But I realized I needed a better plan to achieve my goal of retiring early as a millionaire.
- Now I strictly monitor my budget, diversify my investments and create new sources of income.
For most of my 20s, I rolled my eyes at the thought of saving money for retirement. I mismanaged my finances, spending more money than I earned, so the idea of putting money aside for the distant future was something I was totally unwilling to do.
When I turned 30, I realized that I no longer wanted to struggle financially. But to change that, I would have to make some significant adjustments.
I created an emergency fund, stuck to a strict budget, started investing and, for the first time in my life, took retirement saving seriously by opening a SEP IRA.
But as I saw more and more adults in my life not being able to retire at 65, I knew I didn’t want to follow in their footsteps and continue working hard in a full-time job at that age. . That’s why I’ve set myself an ambitious goal: to retire (ideally in my 50s) as a millionaire. To get there, I’m taking five steps right now.
Use Insider’s calculator to see if you’re on track for a comfortable retirement by answering a few questions about yourself, your savings, and how long you plan to keep working.
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1. Keep an eye on my money
Even though retiring as a millionaire is my future goal, in order to take action in the present to make that happen, I need to make sure I have full control of my finances now.
For the past year, I have set myself a strict monthly budget that I usually stick to (or am about to stick to) in order to limit overspending. I try to save 20-25% of my income each year and use that money to fund my emergency or retirement fund, or put some of it into my investment portfolio.
To make sure I stay on track, I regularly check my finances.
On a day-to-day basis, I make sure to tally up all the purchases for the day and track those numbers in my budget.
Every week, I check my credit card statements to stay on top of my spending and make sure there are no errors.
At the end of the month, I spend an hour doing a self-report of all of my net worth, tracking how much my investment accounts have risen or fallen over the month, how much I’ve been able to save and decide how much extra money. I can contribute to my retirement fund that month (in addition to my monthly minimum that I contribute).
2. Make recurring contributions to my pension fund
Before I turned 30, I had a small 401(k) that I had contributed to several times over the years and nothing else to show for my retirement savings.
After opening a SEP IRA, I decided to contribute a minimum amount at the end of each month. By contributing monthly to a SEP IRA, the money in that account can grow tax-deferred until retirement, meaning I don’t have to worry about paying taxes on that money or growing it until I retire. ‘see you later. When I retire, any money I withdraw from this account will then be taxed as income.
3. Increase my income streams
When I ask financial experts how people retire as millionaires, I often hear them say that the average millionaire has multiple sources of income. I realized after being laid off from my full-time job in 2015 that relying on just one stream of income was dangerous and limiting. Instead, I try to have between five and seven streams of income at a time.
Currently, I have income from my business and several hustles, which include freelancing, selling courses and products online, offering my services for hire (whether it’s babysitting, ‘pets or child care) and the monetization of my audience on social networks. I hope to continue to add more passive income streams in the near future by investing in real estate and renting out the property.
4. Do not go into debt
Although I absolutely want to avoid debt, things happen in life and I could find myself having to finance a major purchase or pay for an emergency without notice.
In order to plan for the unknown, so that I can avoid credit card debt, I have spent the last four years building up my emergency fund.
As I am self-employed, some financial experts recommend that I have at least six months of expenses saved in an emergency fund. But because I’m hyper focused on being able to stick to my spending and saving strategy, to reach my future retirement goal, I decided to save at least eight to 10 months in my fund emergency to cover any unforeseen expenses.
5. Diversify my investments
When I started investing a few years ago, I invested money in individual stocks and cryptocurrency without really having a plan. I realized that I was not being strategic with my investments and decided that to increase the chances of my money growing in the market, I needed to diversify my investments.
To do this, I invested in index funds and mutual funds in many different verticals (instead of just buying individual tech stocks, as I had been) and invested in funds including both U.S. and foreign companies.
By doing this, I can avoid taking too much risk with my money in the market and opt for a longer-term growth plan instead.