We all dream of retiring early, sipping cold drinks on a beach somewhere, far from the hustle and grind. But how realistic is it? Early retirement isn’t just a fantasy, but it does require careful financial planning, commitment, and a bit of smart money maneuvering.
- Start early and maximize your retirement schemes
You’ve probably heard this a thousand times, but it’s worth repeating: start saving for retirement early! Thanks to the magic of compound interest, even small investments made in your 20s can grow significantly over time. According to Albert Einstein, compound interest is the “eighth wonder of the world,” and who are we to argue with him?
For example, programs like Ejo Heza can help young people who work in the informal sector save money for early retirement. Ejo Heza leveraged Rwanda’s existing digital financial inclusion infrastructure and ecosystem to provide convenient access to high-quality investment governance, even to citizens with low and irregular incomes, limited experience with formal finance and low financial literacy.
For example, with Ejo heza, if you start saving 20,000 Rwf every month when you are 25 years old, by the time you are 55 years old, you will have saved 39,478,565.45 Rwf that you can withdrawl and use for personal projects.
- Track your spending—know where your money is going
“Money talks, but all mine ever says is goodbye,” the comedian Richard Armour once quipped. That’s likely because many people don’t actually know where their money goes. Before you even think about early retirement, you need to get a firm grip on your spending habits.
Cutting back on unnecessary spending doesn’t mean living like a monk, but it does mean prioritizing. Ask yourself: do you really need that 4,000 rwf coffee every day? At the end of the month you find that you have spent between 100,000 rwf and 120,000 rwf on just coffee.
- Live below your means
One of the harsh truths about early retirement is that you can’t spend like a rock star and still expect to retire at 45. Living below your means is the cornerstone of early retirement. Most people can live happily on 25–50% of their income if they cut out unnecessary expenses.
This might mean opting for home-cooked meals instead of dining out. While it may sound dull, it’s a tried-and-true way to fast-track your early retirement dreams.
- Consider multiple income streams
If you want to retire early, one income stream is often not enough. Many early retirees bolster their savings through side hustles, real estate, or passive income from investments. Whether it’s freelance writing, tutoring, or selling handmade crafts on e-commerce, diversifying your income streams will put you ahead of the game.
- Keep Your endgame in sight—What’s your number?
Lastly, to retire early, you need to know your number—the amount you need saved to live comfortably for the rest of your life. Financial experts often recommend saving 25 times your annual expenses. Tools like the FIRE (Financial Independence, Retire Early) calculator can help you map out your retirement goals, factoring in your current savings, investments, and the desired age of retirement.
Retiring early may sound like a pipe dream, but with discipline, strategic saving, and investing, it’s entirely possible. Start early, live below your means, and make smart investments.
