How to Retire Early: A 10-Step Guide

A young couple sitting in deck chairs on the beach and watching the sunset
Michael Traitov /

Retiring early seemed something of a pipe dream 20-odd years ago, but it has become an emerging trend in today’s day and age. Indeed, early retirement – otherwise known as the FIRE movement (Financial Independence, Retire Early) – is steadily growing, with more and more people retiring in their 30s and 40s (an age where most just found stability in the 1990s).

These young retirees are proving that you can become financially independent and retire at a young age – as long as you are smart with money and you make a few sacrifices along the way!

So, to help you shape your strategy and start saving for a worry-free retirement, we’ve devised this handy guide.

Here’s how to retire early in 10 simple steps.

1. Pay Off Your Debt

There’s no way you can start saving for retirement unless you’ve eliminated all your debt. This includes loan repayments, mortgages and car payments. The best way to start reducing your debt is to list them from the payments with the highest interest rates to the least and start tackling the largest first.

The sooner you can get this outgoing cashflow off your shoulders, the better! Therefore, before you start saving for your retirement, focus on paying off all your overheads.

2. Track Your Spending and Create a Budget

You can’t really know if you’re able to retire early if you don’t know how much you’re spending throughout the year. By tracking your spending, you can identify where you can make cutbacks and see how much you need to live on per year when you retire. You might realise that you’re purchasing way too many treats or unnecessary cups of coffee and that you can cut back on that $20 manicure or $30 vape liquid!

So, for the first few months of rolling out your new FIRE plan, be ruthless about what you need to live a decent life and start making allowances for your future. You can then create a budget like the diagram below.

Retirement expenses tableRoot of Good

3. Don’t Inflate Your Lifestyle

As you progress in the working world and gain bonuses and pay rises, you’ll have an increased amount of flexible cash. When this money comes in, you’re most likely going to spoil yourself (and why not? You’ve worked hard for that promotion!). But if you do plan to retire at 40, you’ll get there much faster if you start saving the extra income instead of inflating your lifestyle and trying hard to stop relying on the luxurious things that you are used to.

4. Up Your Savings

The only way it’s possible for you to retire early is to have enough savings. So, if you’re only saving 10% of your monthly income (as heaps of blogs out there have probably advised you), you need to change your strategy immediately.

To retire early, you need to start saving aggressively. Joel Jonathan, who retired at the age of 34, did so by saving 80% of his monthly income. For him to do so, though, he made a lot of cutbacks and lived on the bare minimum for five years.

5. Take Up a Side Gig

Which brings us to our next point. Getting a second job can be a great way to increase your savings and be in the position where you can retire. Let’s say you start working one shift in a bar once a week and you earn $50 a night; that’s an extra $200 a month, which adds $2,400 a year into your saving pot! If you then invest that money in a pension account with 8% interest, you can get $192 for free in your first year!

Alternatively, you could start your own business. If you’re good at baking, for example, why not create a website and start promoting your baked goods online? You could even start off by selling to your family and friends. Good at crafts? Set up an Etsy page! Good at cleaning? Start your own cleaning service! (Check out our list of side gigs for more ideas!)

6. Invest Wisely

A great way to ensure that you’ll have a definite inflow of income when you retire is through investment, and the best type of investment growth is property. Let’s say that you’ve invested in an apartment in a great location. The rent money that comes in will most likely cover the mortgage and any fixtures, but once you’ve managed to pay the mortgage off, a great portion of the rent payment will be clear income for you to live off.

Similarly, you could invest in bonds that generate a fixed amount of non-taxable interest over time. Although it won’t be an extremely high amount, it’s another great way to keep your retirement money out of reach while generating an increase.

7. Have a Contingency Plan

It’s always a good idea to have a backup plan. You never know when an emergency will arise and will need to take a larger amount of funds out than usual.

As such, it’s wise to have a second source of income – whether that’s renting your house out for the summer (if it’s in a good location) and moving in with your parents or another relative, or finding a part-time job.

8. Consult a Financial Advisor

If you’re not very good at saving money (and let’s face it: who is?), then meeting with a financial advisor could be the push you need to get yourself on track. In fact, financial advisors can boost retirement income by more than 20% over the lifetime of an investment.

A financial advisor will assess your financial situation and help you create a realistic plan that you can stick to in order to meet your early retirement goals. But this unique plan doesn’t come for free; financial fees usually range between $1,000 and $2,000 for a comprehensive financial plan. However, they should be viewed as an investment; you’ll pay money now, but you’ll save a lot later!

9. Sell Your Possessions

Some possessions are expensive to maintain and are often unnecessary. When you’re trying to save for early retirement, it’s advisable to sell these, especially if you don’t use them. For example, do you really need your car or can you rely on public transport or your two feet to get from A to B?

By minimalising your life, you’ll be able to save for more important experiences, like travelling and enjoying early retirement. You’ll also have less to worry about. For example, when a car needs urgent maintenance, you’ll have to either put yourself in debt to fix it or take the funds out of your savings (both are a hindrance).

10. Downsize Your Home

While many people work to pay off a high mortgage and end up surpassing the retirement age, you can do the exact opposite by downsizing to a smaller home or even moving in with relatives.

You can also reduce household expenses by cutting off your cable TV, reducing your internet speed, avoiding the use of heating and air condition, and using energy-saving light bulbs. Additionally, you don’t really need your Netflix account and Spotify subscription, do you? And why not take up more DIY projects instead of paying professionals to come and do the work for you? You’ll get to learn useful skills that can benefit you later down the line!

If you’re not a high-earner, it’s much harder to plan for early retirement, but it’s not entirely impossible. With these handy tips and a lot of self-control, you can well be on your way to finally living the life that you dream of!

What are your top tips for FIRE? Join in on the conversation below and to let us know!