Do you ever dream about retiring early? Do you fantasize about quitting at 45, not 65, to follow your passion—the one that pays in smiles rather than dollars? If so, you're not alone, says Barbara Goodman, senior editor for Smart Money
magazine. And with careful planning and moderate sacrifice, you can
retire early, she says.
Jean talks with Barbara about her article, "Cash Out," in the October 2007 issue of Smart Money
, which profiles ordinary people who managed to quit working years earlier than their parents did. Barbara also shares what it takes to retire before you go gray:
- Strive to be debt-free. "There's no way you can retire early if you are carrying around a lot of debt—that includes credit card debt, car loans and your mortgage," Barbara says. Come up with a plan to get rid of the debt, she says. Paying off your mortgage early is one option, but if that is not practical or sensible, be sure that you can cover your mortgage comfortably once you retire. And before telling your boss goodbye, be sure to pay off those credit cards and car loans.
- Save, save, save. Figure out what you'll need to live comfortably once you retire and create a savings plan to match. A good financial planner can help you analyze your budget, save money and invest wisely, Barbara says. Instead of impulse buying, try impulse saving—taking what you might have spent on a new handbag or neighborhood restaurant to the bank instead.
- Downsize. Depending on how much you have saved, you may need to scale back your lifestyle to prepare for retirement. Delay buying that new car or flat-screen TV and consider limiting your children to affordable college options if the tuition's on you. Trade your home for something smaller or move to a place with a lower cost of living. It could be that your dream home is waiting for you in a great town where houses cost half as much.