How To Retire Early (3 Ways)
By: Justin Zhuo Yan He
Tags: Financial Independence, Passive Income, Financial Freedom, Money, Personal Finance

Photo by S Migaj on Unsplash

Achieving financial freedom early in life provides you with the opportunity to live life on your own terms.

Most people are tied down to jobs until their 60’s or 70’s, and when they finally do retire, most of their time in the world is gone. If decades of wage slavery hadn’t beaten the dreams and aspirations out of their spirits already, they only have a short time window to pursue what they really want to pursue if money was not an issue, and they would be well past their prime at that point. Even then, they’ll have to make sure they don’t run out of their savings and can’t overspend their pensions, that is, if they relied on their salaries as their sole source of income.

Of course, some truly enjoy their jobs, who find fulfillment through their occupation. But those are the lucky few. If most people suddenly received more money than they can spend in a lifetime, a great many of them would quit their jobs. Only a happy minority would keep doing their jobs even if they won the lottery.

Being able to retire early will allow you to live the life you truly desire. Whether you have dreams of starting your own enterprise, traveling the world, becoming a politician, exploring your creative potential (writing, video-making, music, art, etc.), spending more time with family and friends, or simply not having to answer to anyone to make a living, early retirement will give you the freedom to do so. Even if you love your career, it’s better to do your job because you want to rather than have to out of financial necessity.

In this article, I will discuss the three paths to early retirement. By early, I mean 20’s and 30’s. If you’re past that age, this article will still be relevant because it will enlighten you with ideas on how to retire as early as possible.

1. Inherit a lot of money

The first and most obvious path to early retirement is inheriting a lot of money.

I won’t delve too much into this path because it is generally out of your personal control, but if you are one of the lucky ones to inherit a lot of money, then congratulations, your family has been financially successful and has passed on their wealth to you. Honor them by taking care of this wealth so that you too may pass it on to your children and future generations of your family.

You may decide to invest your money, use it to fund business ventures, or simply not squander it away. Managing your wealth wisely will allow you to maintain your financial freedom so that you can continue living life on your own terms. Squandering your money would end your early retirement.

Of course, many people nowadays inherit money through trust funds. In that case, you’ll likely receive payments at intervals rather than having total control over your family assets. I still count this as early retirement through inheritance because if your payments are large enough, you will never have to do anything out of financial necessity and can pursue what you truly desire in life.

2. Make it big

The second path to early retirement is to “make it big.”

Now, this is a vague term, so I will elaborate. To “make it big” is to make a lot of money all at once or over a short period of time. This includes winning the lottery, selling a successful startup, etc.

A lot of front-loaded careers allow you to make a lot of money over a short period of time so that you can retire early. A front-loaded career is a career that often requires or benefits from youth or physical ability, such as in sports, modeling, acting, etc.

For example, sports stars can be so successful that they land extremely lucrative contracts that provide them with more than enough money to last a lifetime. Likewise, supermodels can also win high-paying contracts while they’re in their physical prime so that they can retire by their 30s (or even earlier). Successful actors can also land big roles that pay a fortune.

This path to early retirement can be highly competitive. Besides winning the lottery, which is down to luck, the other options only allow the very best to “make it big.” If you go the startup route, you must face the reality that many startups fail, and only the most successful startup founders will make a fortune. If you go with the front-loaded careers, only the most successful will be able to make enough during their prime so that they’ll never have to work again. Others who are not as successful would have to continue working. Former sports players often become coaches or managers, former models often become designers or photographers, and former actors often become directors and producers (or they can continue acting as old characters).

3. Build sources of passive income

The third path to early retirement, and the path that is most accessible, is to build sources of passive income.

Remember earlier in the article; I discussed trust fund allowances as a form of inheritance? That is a source of passive income. Those who inherit money from trust funds often do so through regular payments rather than a lump sum. It’s sort of like having a regular salary without actually needing to work.

Which is what passive income is. Passive income is income you receive with little to no work.

But acquiring sources of passive income often does require work: you either have to put in the time to build them, or you have to put in the money to buy them (if you inherited passive income sources, then the person who passed it on to you put in time or money to acquire them).

Examples of passive income sources include financial securities (stocks, bonds, ETFs, etc.), real estate, intellectual property (music, books, films, patents, etc.), social media monetization programs, affiliate marketing, owning businesses, etc.

Obviously, simply acquiring passive income sources doesn’t necessarily mean you’ll be able to retire early. Almost anyone can buy a few stocks or write a book, but that doesn’t always mean they’ll earn enough to retire. The key is to build up these sources of passive income so that they generate enough income for you to live comfortably without needing to take up a job. The quality of your income streams is very important.