As members of Jamaica’s Civil Service are being
invited to apply for the Special Early Retirement Programme
(SERP) thought I would share some useful information.
While the average Jamaican 65, a few have realised financial
independence at an earlier age that have allowed them to retire much sooner
You track your
expenses
Whether you track your purchases in a spreadsheet
or use some fancy software application, knowing how much you need to fund your
lifestyle is crucial.
In fact, many early retirees started their journey
to financial independence by analysing their spending habits and figuring out
exactly how much they needed to retire comfortably.
You've thought
about your future lifestyle
If you can envision your future —
whether it involves traveling, buying a vacation house or gifting money to
family — you'll have a better idea of what your
expenses in retirement will look like. But it's an essential part of creating a
practical, realistic retirement budget.
You've set clear and specific retirement goals
If you've set a target date, you're on the right
track to retiring early. You'll also want to make a retirement budget, which
will help you figure out exactly how big your
portfolio needs to be to last through your golden years.
Many early retirees use the "ten percent rule" to help them
determine how much they'll have to save.
You pay yourself
first
When you earn a dollar, the first person you pay is
you, meaning you consistently send a chunk of your gross income to a
tax-advantaged retirement account. The earlier you want to retire, the greater
the percentage should be.
Bonus
points if you've automated
your system, meaning you have money automatically
taken out of your salary and sent straight to your savings, retirement or
investment account.
You have more than
one savings account
If you've considered alternate retirement savings
accounts besides your normal pension plan, you're ahead of the curve. As the experts point out, relying on one savings
vehicle may not be enough to fund your future. Even better, you've considered
investing money in Unit Trusts or Mutual Funds.
You save half your
income
Most early retirees have the discipline to keep a
large chunk of their salary — often, more than half of it — thanks to a variety of strategies.
If you're working towards setting aside 50 percent
of your salary, you're well on your way to financial freedom.
You think about
money as something to invest
You don't just save money, you put it to work. Savings
is only the start. You must progress to investing what you have saved.
This applies to any surplus money that comes your
way. If you earn a raise, bonus, birthday check or small windfall like redundancy payment, and
direct at least some of it towards savings instead of planning trips or
grabbing gadgets, you're doing something right.
You maximize your
income
If you're thinking about ways to generate more
income, in addition to saving a ton, you're on a good path.
At a certain point, you need to figure out how you
can make more money, because that's really limitless. You're never going to get
to zero spending, but you can always make more money, so once you get to a
balance of spending that you're comfortable with, focus on pulling on that
other lever that you have, which is making more money.
Increasing your revenue streams could mean
finding a part-time job, starting a side hustle or establishing passive income.
Now start thinking and more importantly taking the
necessary actions to secure the rest of your life.
