How to Retire Young

There are unlimited ways to retire young. I am going to advise you of just some of them. I am assuming that you have not been lucky enough to have received a reasonable inheritance and that you are starting from the beginning. I will include job/working/business, automatic savings in some form, budgeting below your income level, use of personal debt, automatic savings in some form and buying cash producing assets such as real estate and shares. As you "grow" your equity, that part which you actually own, I feel sure that if you are focused, you will find many other ways to add to this figure. The first hurdle to overcome is to decide on your goals and set down on paper the quantities that you would like to reach and by which year.

The highest rewards from "a working life" will be gained by working in an area in which you are passionate. The best rewards in terms of dollars may come from your own business, as in this regime you have the chance of paying the lowest amount of tax. The greater your income, the easier it may be to save, but you must organise this to be automatic, and not rely on saving from what is left over at the end of the pay period.

Have a definite figure deducted into a bank account each pay period. Make it a high interest savings account (maybe online). Also, have automatic salary-sacrifice into superannuation. This will save tax and ensures that you are automatically setting aside money for the future.

To assist with saving the highest amount, resist taking on personal debt. This is debt for cars, furniture, clothes and anything which decreases in value over time. It can be in the form of personal loans, higher purchase and probably the worst culprit, credit cards. The only debt that you should ever use is for appreciating assets such as real estate, shares and for business. Cars often require the highest loan next to that of your home. Cars also have the greatest and fastest decline in value. Always spend the minimum possible on them. A lot of the money which we spend is on items that we do not require, and can easily do without. We often purchase them because of the challenge and from boredom.

After you have saved a deposit, buy real estate in high demand areas. This does not need to be the home you live in, but it can help to increase your equity and could be the most practical way. When you have some equity, use this to borrow to buy investment properties. Buy properties which require renovating or lend themselves to some form of improvement such as adding a garage, bedroom or bathroom. The more appreciating assets that you own, the younger you may retire. You must try to accumulate these as early in your life as possible.

Obviously, to get started, you must have some form of savings or equity to make you attractive for the banks to grant loans to you. Do not be afraid to borrow money for appreciating assets, as it is not possible to save these amounts of money. This will also provide you with the best tax claiming situation.

Property can be purchased using negative gearing. This is when the loan and holding costs are greater than the income. This can be used to your advantage if you have a good income from a job or business. Eventually the rents will catch up to the costs and you will receive a positive income. The alternative way is to buy positive income property from the outset. This can be more difficult as these properties may break the rule which I mentioned earlier; of buying "real estate in high demand areas". Therefore, capital appreciation can be much slower and will limit your ability to buy more assets.

Shares are another way to accumulate wealth. There are many ways to prosper from them, but there are also as many ways to lose your money. Shares tend to have a higher risk factor than real estate. The average person usually has more knowledge of real estate. Without a lot of knowledge of shares, the safest way will be to buy blue chip shares which pay dividends of at least 5%. You should hold these through the "ups and downs" of the business, economic and share market index cycles to eventually have an income. You will accumulate the highest number of shares by using dividend reinvestment, rather than taking cash. This will also then provide you with an income. It is possible to increase your returns by having a Margin Loan. This is similar to "gearing" for property. Due to the greater risk with shares, institutions will not usually loan as high a "loan to value" percentage as with property.

The balance between borrowing funds to buy appreciating assets requires you to be vigilant. It is easy to buy them and find that your cash flow is very poor. Your cash flow must always be such that it allows you to retain the appreciating assets. It can be a backward step to have to sell off an appreciating asset, although occasionally it is necessary. This was the case for many in the recent World economic crisis.

There are so many other ways of investing for the future. The greater the return gained on your invested capital, the greater the risk of losing your investment capital. Alternatively, you must be mindful of "nothing ventured, nothing gained".

I have advised you of just some of the ways of "How to Retire Young". There are unlimited other ways. To guarantee this result, you must write down on paper or on your computer the income and asset figures that you wish to achieve, and particularly have written down your target age. Read this each and every day and write down a plan of how you are going to achieve it using my suggestions of job/working/business, budgeting below your income level, limiting your use of personal debt, automatic savings in some form and buying cash producing assets such as real estate and shares. Anyone on any income level can "retire young", but you must make this uppermost in your mind and never waver from your resolve to achieve it. I feel sure that by instigating these measures you will "Retire Young".