How to retire early: a 10 minutes crash course on smart retirement

how to retire early

We’ve all heard of retiring early but what does that actually mean? What are the immediate, actionable things you could do to retire early and be financially independent, debt free and happy? How to retire early is a question asked so many times, we’ve decided to create the following crash course which takes, at most, 10 minutes to go through and start working towards this goal today.null

Advice #1: max out your 401(k) and start putting money towards an IRA

If your employer is offering 401(k) matching, don’t miss this opportunity as you’re literally leaving (tax) free money on the table. Make sure you max out your employer’s contribution and keep doing this as long as you are employed.

Next step, depending on your options

Advice #2: stop missing credit card payments (and ditch credit cards forever)

It’s easy to overspend on credit cards – studies show that you’re more likely to overspend by ~10% when you go shopping with a credit card in your pocket. To make it worse, a lot of people are paying just the minimum amount (generally, that’s $25) to avoid penalties, but that doesn’t spare them of interest.

This advise is simple and straightforward: pay your credit cards in full and do not overspend. In fact, our best advise is to stop using credit cards altogether and use debit cards for each of your expense type and monitor that spending via a free tracker such as Mint. That will always force you to not spend beyond your purchasing power while tracking where your money is going.

Start by putting in a spreadsheet all your expenses and identify the common themes for your budget. For example, you might end up with groceries, rent and utilities, entertainment and miscellaneous. Set up 4 debit cards for each of them and make sure you set spend limits according to the spreadsheet you’ve build. Our personal favorite for doing this in a mobile banking app is Chime, but you can literally do this with any bank that can offer you a debit card, really.

Advice #3: cut useless recurring expenses

Start by looking at one’s typical monthly subscriptions:


Are you paying for cable or Netflix but rarely use them? Maybe it’s time to ditch them and switch to a digital antenna if you still want to watch TV from time to time. Also, are you paying for premium Spotify or Apple Music plans? There are tons of free, ad-supported alternatives such as Pandora and even Spotify.

Breakdown of expenses

  • Netflix: $14.99
  • Cable: $70
  • Apple Music/Spotify: $9.99

Total you’d be saving a year: $1,140

Membership fees

Now I know you want to build those glutes and get in shape for the summer but, honestly, how many times a month you’re actually hitting the gym? Is it worth paying that $99/month instead of, for example, eating healthier and running outside which, by the way, it’s FREE!

Another area where you can optimize your budget is warehouse clubs membership: we all love Costco (and, maybe Sam’s Club) but you don’t need to be a member to shop there – just ask someone with a membership to get you a cash card and you’re set!

Breakdown of expenses

Total you’d be saving a year: $99×12 months + $60 (Costco membership) = $1248.

How to reduce these expenses in bulk

If you are lazy like us and want to have someone else cancel these subscriptions for you, give a shot to Truebill, our personal favorite – you need to connect their mobile app with your credit cards, let them figure out which expenses are recurring and them direct them to negotiate or cancel those subscriptions for you.

To sum up, you should be able to save around $2.3k a year only by simply adjusting your lifestyle and getting a bit more creative about your options. Check the next advise to see what you should be doing with this money.

Advice #4: invest in a 3 index funds portfolio

This is not coming from us, rather from a finance legend, John Bogle, the founder of Vanguard. What the whole idea here is about is that, instead of you trying to beat the market by betting on individual stocks, invest in the entire market and BE THE MARKET.

What this strategy basically suggests is to invest in:

  • an entire US stock market index fund, for example Vanguard’s VTSAX
  • an entire International stock market index fund, for example Vanguard’s VTIAX
  • an entire bond market index fund, for example Vanguard’s VBTLX

The split between these depends a lot on your risk profile: if you want to be more aggressive and you don’t care about market fluctuations in the short to medium term, then you can choose to have, for example a 60/30/10 split (US/International/Bonds). This type of allocation historically comes with higher risks but better returns. On the other hand, if you are more risk-averse and/or you are closer to retirement, for example, you can choose a more conservative approach where bonds represent 30-40% of your portfolio.

Returns on bonds are not that great, however they don’t fluctuate as often, hence this is a risk mitigation approach.

Depending on your broker, there are multiple options in the market such as Charles Schwab and Fidelity if you prefer those instead of Vanguard. The whole idea, again, is to go with the market and be as diversified as possible without being tempted to beat the market, a task that is impossible even for the most experience fund managers out there.

Also, make sure you choose the funds with the lowest (if zero) fees. For tax purposes, you can also look into ETFs (Vanguard’s VTSAX has its ETF counterpart, VTI, which I personally use to invest into). This entire strategy is described on the Bogleheads forum – a community we highly recommend. There’s also a book that explains this entire approach, you can get it from Amazon here

Additionally, make sure you invest constantly into this 3-fund portfolio: dollar-cost-averaging is a proven successful strategy that works wonders over time. Start by setting up a recurring investment into your portfolio today and watch your money grow – a good idea is to invest the money we’ve looked at in advice #3. Also don’t forget to set up DRIP, which basically reinvests all your dividend payments into your account and will also accelerate the rate at which your 3-index-fund cash stash will grow over time.

Lastly and more importantly: stay invested in the long-run. Don’t look at the market, just stay consistent and keep investing. This strategy has been proven to be successful in the past few decades and only long-term investors are the true winners who will be able to retire early.

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