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- I finally got serious about retirement planning in my 30s and opened a SEP IRA.
- But I realized I needed a better plan to reach my goal of retiring early as a millionaire.
- Now, I am keeping a close eye on my budget, diversifying my investments, and creating new sources of income.
For most of my 20s, I rolled my eyes at the idea of saving money for retirement. I was mismanaging my finances, spending more money than I was earning, so the idea of putting cash away for the distant future was something I was totally unprepared to do.
When I turned 30, I realized that I no longer wanted to struggle financially. But to change that, I have to make some important adjustments.
I started an emergency fundSticking to a strict budget, began investing, and for the first time in her life took seriously saving for retirement by opening a SEP IRA.
But as I saw more and more adults in my life not being able to retire at age 65, I knew I didn’t want to follow in their footsteps and still be working hard at a full-time job at that age. . So I set a big goal for myself: to retire as a millionaire (ideally in my 50s). To do that, I’m taking five steps right now.
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1. Keeping a close eye on my money
Even though retiring as a millionaire is my future goal, in order to take any steps currently in order to do so, I need to make sure that I am now in complete control of my finances.
For the past year, I’ve set a strict monthly budget that I usually stick to (or am very close to sticking to) limiting spending any more. I try to save 20 to 25% of my income each year and use that cash for my emergency or retirement fund, or contribute some of it to my investment portfolio.
I check my finances regularly to make sure I’m staying on track.
On a daily basis, I make sure that I keep track of all the purchases of the day and track those numbers in my budget.
On a weekly basis, I check my credit card statements to be mindful of my spending and make sure there are no mistakes.
At the end of the month, I spend an hour doing a self-report of my overall net worth, tracking how much my investment accounts went up or down for the month, how much I was able to save, and decide. How much extra money I can contribute to my retirement fund that month (in addition to my monthly minimum contribution).
2. Making Recurring Contribution to My Retirement Fund
Before I turned 30, I had a small 401(k) that I contributed a few times over the years and had nothing else to show for my retirement savings.
Later Opening a SEP IRA, I decided to contribute the minimum prescribed amount at the end of every month. By contributing to a SEP IRA monthly, the cash in that account can be tax-deferred until retirement, which means I don’t have to pay taxes on that money or worry about it growing later. At the time of retirement, any money I withdraw from that account will be taxed as income.
3. Increase in my income
When I ask financial experts how people retire as millionaires, I often hear them say that the average millionaire has multiple streams of income. After being fired from my full-time job in 2015, I realized that relying on a single stream of income was dangerous and limited. Instead, I try to be in the middle Five and seven streams of income At the same time.
Currently, I have income from my business and various aspects, including freelancing, selling courses and products online, offering my services on rent (whether pet care or babysitting) and earning from my social media audience. includes doing. I look forward to continuing to add more passive income streams by investing in real estate and renting out properties in the near future.
4. Staying Out of Debt
While in debt I want to try to avoid completely, things happen in life and I may have to pay for a big purchase or an emergency without notice.
To plan for the unknown, so I can stay away from credit card debt, I’ve built up my emergency fund over the past four years.
Since 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 sticking to my spending and savings strategy to meet my future retirement goals, I put at least eight to 10 months in my emergency fund to cover any unplanned expenses. Decided to save.
5. Diversifying My Investments
When I started investing a few years back, I invested money in different stocks and cryptocurrencies without any plan. I realized that I was not being strategic with my investments and decided that, to help increase my chances of making money in the market, I needed to diversify my investments.
I it. made by investing in index And mutual funds in several different verticals (rather than just buying individual technology stocks, as I was) and invested in funds that included both US and foreign companies.
By doing this, I can avoid taking too much risk with my money in the market and instead go for a more long term growth plan.