Episode Details

The goal for many in the Financial Autonomy community is to retire early. Early retirement means different things to different people, but as I always talk about, Financial Autonomy is about gaining choice. So whether you're early retirement consists of lying on the beach in Fiji at age 40, or traveling around Australia with your caravan when you're 55 and picking up odd jobs as they crop up, this post is for you. I haven't gone into a tonne of detail on any of these 6 ideas, because to my mind, a hack means a short cut, and so that's what I'm delivering here today.

1. Work out your expenses

Start by determining what you spend now. The banks are coming up with good tools to help you in this area. There's also a good tool at the MoneySmart web site.

Once you've figured that out, create a second version with what you would expect that to become once you retire. Will you travel more? Will you go down to one car in the household. Perhaps the kids will be off your hands and so food costs will decline. Maybe you're planning on a tree change which will see your mortgage wiped out.

The point is, when they wanted to put a man on the moon, they didn't just shot rockets up randomly and see what landed where. They had a clear goal and then they worked towards that. For you, your equivalent of the moon landing is being able to meet your expenses for the life that you want to lead. Unless you quantify what that number is, how can you possibly take steps that will deliver success?

For a more detailed look at this topic, check out episode 31 – What's your number.

2. Figure out a debt plan

Sure, it may not be essential to be debt free when you retire, but in my mind, if you still have debt, then you can't afford to retire yet. So the next early retirement hack is to figure out how you will be debt free by the time you pull the plug on your current day to day way of paying the bills?

That could be as simple as working to a schedule of paying money off each month until the debt is cleared. That's the most typical way debt is paid after all.

If you've got high interest debt, such as credit card debt that you're not clearing regularly, then perhaps your debt plan is to refinance that into a lower interest loan and then pay that off as quickly as possible.

Or perhaps your debt plan is a bit bolder. Maybe it is to sell the inner city home and buy something out of town for a fraction of the cost, with the difference between the 2 prices providing funds for debt clearance and maybe also income in retirement.

A tree or sea change may not even be necessary, perhaps you simply downsize. If you're in a large family home, there's likely a time in your life, when the kids are off on their own journeys, that a smaller home or unit might be better suited to your needs.

So there's all sorts of ways you can be debt free at your early retirement – figure out your plan.

3. Invest aggressively

In bringing your early retirement aspiration to life, it's highly likely that you will build up some investments that will provide passive income when you enter your early retirement phase. Now you could build up these investments in your bank account but you will have to do all of the heavy lifting through contributions. A better option is to invest in growth assets such as shares and property to gain the benefits of higher compounding returns. Now of course these assets have volatility and risk, as discussed in episode 35 Investing - how to get started, but that can be managed through appropriate time frames and asset allocation mixes.

As I explored way