After just a few years in the rat race, many of us would start to dream of retiring early. For those among us with kids the main benefit of retiring early is the time it affords us with our families. The reason or early retirement incentive would vary depending on the individual. Of course the downside to early retirement is the lack of peers or people of the same age to hang out with since most of them would still be slogging at their day jobs.
The first step to achieving your early retirement goal is to have an early retirement plan. Plans are good as they keep you focused on your objectives. If your have a home business venture, you can work it into your business plan format.
4 Simple Early Retirement Planning Tips
Diversify Investments
There are no guarantees when it comes to investments so it is always good to diversify your investment portfolio. In other words, never put all your eggs into one basket. This is also known as risk hedging. As a rule, never place more than 10% of your savings into one single investment. This way, if you have 10 investments and one of them does not go according to plan, you would still have 90% of your investments to back you up.
High ROI
The higher your returns on investments, the faster it would take to reach your early retirement goal. But investments with higher returns usually have a higher risk factor associated with them. A diversified portfolio should therefore include steady blue chip investments and a fair share of higher yield investments. Therefore, in depth research has to be carried out before such investments can be made.
If you are a home business venture owner, you can opt to sell FMCGs (fast moving consumer goods) which has a ready market or larger sales volume but has a lower profit margin. Alternatively, you can choose to sell products to a niche market, which has a smaller sales volume but much higher profit margin. Your decision should be based on a myriad of factors which would include cost of sales, market potential, competition and product life cycle.
Increase Savings
Parents have been telling their kids to put away at least 10% of their salaries for ages. Sadly this good advice goes in one ear and out the other faster than it takes a person to swipe a credit card. People seem more interested in living in the moment and spending every penny they earn and more than to save for a rainy day.
The trick is, as soon as you cash your monthly check, put at least 10% away before you even think of buying that new blue ray DVD player. Just to make it that much more difficult, try investing part of that 10% in a savings investment link scheme. Sometimes having your cash tied up is a good thing.
Target Zero Debt
To have financial freedom is to be debt free. If you find that hard to achieve then at least be in good debt as opposed to bad debt. An example of a good debt is taking a loan to buy something you need or invest in something that has the potential to make you money such as investing in property or a business venture. You can justify taking a loan to invest in a business venture, for example, if the returns is higher than the interest on the loan.
Bad debt is taking a loan to buy something you do not need - like a sports car - which will begin depreciating the moment you sign the sales and purchase agreement.
Being debt free at the cost of using up all your financial reserves is not a good idea either. If you are in debt, ensure your total monthly long-term debt payments, does not exceed 36 percent of your gross monthly income. Come up with a plan to pay up the debt and stick to it. Be sure to watch your credit card debt as it usually entails the highest interest rates.
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Brad Keet is an entrepreneur and Internet junky. Brad invites you to journey with him as he dishes out home business startup tips and other home based small business information. For more of Brad’s take on things, log on to www.fromhomeeveryday.com
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