How to Manage Finances with an Early Retirement Monthly Budget
The early retirement movement, marked by stories of individuals achieving financial independence and leaving the traditional workforce far before the age of 65, has captivated the imagination of many. Walli Miller, a financial coach and founder of Financially Thriving, recently retired at the age of 40 and graciously shared her monthly budget and invaluable tips for those considering the early retirement journey.
Early Retirement Budget Breakdown
Living in the bustling city of New York, Miller and her partner anticipate a monthly income ranging from $3,700 to $4,000. The transparent breakdown of their budget provides insights into the real-life expenses of early retirees:
$1,600 for housing
$50 for two cell phones
$55 for internet
$450 on groceries/household items
$70 for pet-related expenses
$300 for his/her spending/fun money
$200 on eating out/date nights
$35 on subscriptions
$300 on self-care, personal development, etc.
$150 for vehicle expenses — car insurance, fuel, tolls
$132 for the Unlimited Metrocard for transportation
Other discretionary spending categories, such as giving and travel, depend on savings funds and income. The detailed budget underscores the importance of meticulous financial planning for a smooth transition into early retirement.
Steps to Create Your Early Retirement Budget
Create a Spending Plan: Miller emphasizes the significance of a spending plan, citing her use of an Excel spreadsheet with years' worth of data to identify constant and fluctuating expenses. Understanding your monthly spending is crucial for effective planning.
Have a Cash Cushion: Miller recommends having a year's worth of living expenses in a high-yield savings account to serve as a safety net during market downturns. This cushion ensures financial stability, allowing retirees to weather unpredictable economic conditions.
Create an Investing Personal Statement: Discipline in investing is key. Miller advises against chasing trends and emphasizes the importance of aligning investment choices with a personalized philosophy to avoid impulsive decisions.
Enjoy the Journey While Planning for Early Retirement: Financial independence shouldn't come at the expense of quality of life. Miller advocates for spending on meaningful experiences and enjoying life along the journey to early retirement.
Have a Plan for After You Retire: Miller highlights the importance of not only retiring from something but retiring to something. Having a plan for the immediate post-retirement period ensures that retirees remain engaged and fulfilled.
If early retirement is a concept that intrigues you, Walli Miller's insights provide a valuable starting point. Financial planning, discipline in investing, and a balanced approach that prioritizes both saving and enjoying life are crucial components of a successful early retirement journey. While finances remain a significant barrier, creating a personalized financial plan tailored to your lifestyle is the key to breaking free from the traditional work model and embracing the freedom that early retirement can offer.