Pro Tips for Early Retirees

There's no guaranteed strategy for achieving the goal of retiring early, but there are tactics and financial moves that can maximize the probability of success. Working adults who can stop working while in their forties or fifties tend to be very good planners. While a myth persists about early retirees being wealthy adults who either inherited money or won the lottery, the truth is more mundane.

​Those who call it quits long before their sixties usually spent several decades beefing up savings accounts, living on a budget, using home equity to finance their children's college expenses, working a second job, and shopping strategically. Everyone's financial situation is unique, but budgets, homeownership, coupons, and other factors tend to show up consistently in the plans of those who can stop working at least five years ahead of schedule. Explore the following suggestions and see which ones can deliver results for you.

Make a Detailed Monthly Budget

​There's no substitute for living on a reasonable budget. In fact, that one practice is the core element of building enough personal wealth​ to retire several years before schedule. But what does such a budget consist of? For starters, it's essential to make the list of income and expenses as detailed as possible. For bills, include amounts, due dates, remaining balances on credit accounts, account numbers, and other pertinent points. For income items, list the amounts, sources, and dates of receipt.

When constructing the list, several important line items are discretionary and can be set at whatever level you want, if they don't exhaust the income side of the ledger. Common examples of this category include things like entertainment spending, savings account deposits, and others. Attempt to set savings as a percent of income. Some early retirement enthusiasts prefer the 10% mark as a minimum for saving from each paycheck. If that's not possible, adjust other line items to maximize the amount you regularly save or invest.

Consider a HELOC to Cover Kids' College Expenses

​What's the smartest way to pay for a child's college education if you intend to stop working well before reaching the age of sixty? The subject directly plays into the financial plans of parents who want to save as much as possible but still be able to assist children with tuition and other school-related expenses. The good news for homeowners is that a home equity line of credit (HELOC) could be the most efficient and financially savvy way to approach the situation. That's because HELOCs let owners tap into the built-up equity they have in their property at lower-than-normal interest rates. Plus, as long as you have been paying on the home for a few years and reached a level of ownership that entitles you to a line of credit, then it's a fast and simple way to finance a college degree for a son or daughter.

The beauty of HELOCs is that they are designed to let homeowners leverage the financial strength they have already built up in their properties. Unlike a standard bank or personal loans, lines of credit based on homeownership are ready-made sources of cash for individuals who wish to pay for things like college for their kids, medical expenses, a new business venture, a second home, and more. However, for early retirement devotees, HELOC's play a unique role in personal finances because they offer a reliable, commonsense approach to covering higher education expenses for a child without resorting to a traditional loan.

Develop a Second Source of Income

​No matter how small it might be, in addition to claiming all your entitlements and benefits you should create and maintain a second source of cash flow. Many working adults are already stressed from the rigors of a typical work week. The idea of another job might seem frightening. However, there are a few good ways to add an additional paycheck without hitting the physical burnout point. Take on an online micro job for a few hours per week. Boost income by downloading a simple and no-cost coupon app to your phone is a quick way to start saving about 5% on grocery expenses. Every little bit contributes to the long-term goal.

Common options include doing customer service duties by answering incoming calls for designated periods, evaluating websites for functionality and ease of use, and answering consumer survey questions. Don't expect to get rich from a micro job. The goal is to set aside several hours per week to create an additional, slow, steady stream of income. Create a separate savings account for the earnings. Most people are surprised to discover that they've been able to sock away nearly $3,000 by working a few hours per week for a year.