From the moment that many people enter the workforce and become contributing members of society, the number one thing they want to accomplish is to stop working. Retiring early has, for better or worse, become an inseparable part of the American Dream for many people. Sadly, though, it seems to be further and further out of reach for many people, today. Indeed, lots of Americans have simply resigned to the belief that they will likely be working until they die. However, even if your income isn’t anything remarkable, there is little reason to accept this fate. By learning to be smart with your finances, it is certainly possible to set up your life so that you can accomplish your dream to stop working. Hard? Yes. Impossible? No. Here’s some tips on how you can retire early…

Know how much you need

The first thing that any person who wants to retire early needs to do is figure out what exactly their goal is. It’s impossible to set your finances up to reach a certain number for retirement if you don’t know what that number is. Take an honest look at your lifestyle and what you actually spend money on, and what you imagine you’ll spend money on when you’re older. Take a look at what you imagine you will be spending on an annual basis, and then you can begin to strategize how to accomplish that.

Manage your lifestyle expenditure

The biggest mistake that so many people make that negatively influences their possibilities for retirement is that they live paycheck-to-paycheck. This makes it impossible to amass any sort of capital that you can make work for you when you get older. This is why the first step towards creating financial security for yourself when you are older is to take control of your finances, now! Also, by creating a highly sustainable lifestyle for yourself that won’t break the bank when you are younger, you are building habits that will help you control your spending when you are older, so that you don’t squander your retirement.

Create a smart investment portfolio

-(4% withdrawal rule)

When it comes to setting up a comfortable retirement that you can live off of, and being able to retire early, the meat and potatoes of any sustainable plan is the investment portfolio that you set up at the heart of it. Nowadays, it is highly suggested that an investment portfolio for most Americans should sit comfortably at $1.5 million by 2035. Even though it’s important to note that this number is certainly very flexible, depending on your lifestyle, it still might seem like that is a large order. However, the point of an investment portfolio isn’t that you save to that point, but that your savings help you earn most of the money. Speaking to a professional consultant on this matter is probably the best way to know how you should invest your money, but there are a few general rules. Once you are retired, you should aim to withdraw 4% of your investment portfolio every year. Assuming you are going off of the $1.5 million rule, this will essentially mean you are taking out $60,000, annually. However, the goal for your investment portfolio is to grow at least 6%-10% every year. This means that, even if you are withdrawing 4%, your savings are still growing by about 2%-6%.

Use the capital in your home

If you are climbing up in your years and afraid you won’t be able to hit the investment portfolio numbers that are necessary for your retirement, then there is no reason to fret! At the age of 62, there is a financial ability that becomes available to American citizens called a reverse mortgage. This allows you to access the equity in your home without needing to take out a second mortgage, and without having to sell your home. On top of that, no payments need to be made, so long as you are alive and living in that home, so you won’t be buried in more loan payments. This can be a useful tool to achieving the rest of the amount that you need for your investment portfolio, but should also be made wisely and carefully. For more information about when is the right time to get a reverse mortgage, take a look at this useful blog post here.