- Sit down. He suggests sitting down with family or friends to make it an easier and more pleasant activity.
- Brainstorm ways to cut $100 in expenses.
- Capture those methods and put them into an IRA.
- R@T Addition: Write down your expected savings and goal. Put these in a place you will see every day. A written goal you see every day becomes a contract with yourself that is much more likely to be fulfilled.
- R@T Addition: Check back at least every year to see how you did on your goal (this is going to be much easier if you automate tracking of your finances with Quicken)
This is the cost-cutting approach to a faster retirement. Another approach, and the one I prefer, is to keep costs stable and grow income. Some ways to do this (and please share others if you can think of them):
- If you are paid hourly, work a few more hours a week and put that money into your IRA.
- Invest in education applicable to your current or future job (the education has to have a Return on investment, otherwise it isn't an investment in future income it is a leisure activity). Example: Getting an MBA vs. Taking a class on sushi cooking. Unless you're going to use your sushi skills to bring in money somehow, that's leisure not investment.
- Start a side company or business. If you can't work more hours for more pay, you can always start a side business to generate extra income. If you start spending your leisure time becoming an expert in something, and studying how people make money there, and more importantly where arbitrage opportunities exist (If you study vintage clothing for long enough, chances are you could turn an hour into a thrift store and $30 into $100 on eBay).
- Create more value for your boss, and the company you work for. Then, ask for a raise based on your increased importance to the company. At the end of the day you create $X in value at your job, you are paid $Y. $x - $Y = $P the amount of value you have created for the company after they have paid you your salary. If you increase $X, then there is more $P and $Y for you and the company to share. This, of course, doesn't always work. But even if you can't get a raise in your current job, this will put you in a better position to get a promotion or to get a better offer at a competitor. As a general rule, the more value you create, the more you get paid.
- Next time you get a raise, forget you got it and put that money into your 401k, or IRA.
Just like in spending less, when you are creating value to accelerate retirement: Capture is essential. You have to somehow make sure that you don't start thinking of this extra money as spending money. I like completely separate accounts, and tracking this money as either investment or property in Quicken (if it is cash flow, then there is a chance it is going to flow out again).
If you want to retire earlier, you have two options: Live more frugally, or create more value. Obviously these can be combined, but most people it seems focus more on one or the other. While I have now started watching my Lattes, I am unwilling to compromise my standard of living too much to meet my goals. Thus, I'm left with creating more value.
Which path are you taking to meet your goals?