Requirements to Retire Early

Are you also one of the people who want to retire early and achieve Financial Freedom at a young age?

FIRE- Financial Independence and Retire Early. This is my ultimate goal that is why I have been working hard, grinding and hustling nonstop, and trying to maximize every opportunity that I could get to earn additional earnings. I don't want to be spending my whole life trying to work a 9 to 5 job, which I don't even enjoy just to make both ends meet. I want to pursue the things that I am passionate about. I want to be financially independent so that I get time freedom as well, where I could spend my time in any way I want.

However, to retire early and achieve financial independence is not as easy as you say it. You have to go through the needle hole and endure a lot of challenges to fulfill it. But nothing is also impossible if you set your mind to it.

And based on one of the Financial advisors that I look up to, here are some of the requirements before you could retire early. However, this still depends on every person's preference, so don't take it as financial advice and read this article with a grain of salt.

1. If you already have an Emergency Savings/Fund

• Perhaps, some of you do not know about the Emergency Fund so let me share what I know about it. An emergency fund is saving 3-6 months (and can even be up to 12 to 24 months) worth of your monthly expenses, which includes your expenses in electricity, food, water, and other bills. This is what you use in case you got fired from your work, or there are unexpected events that happened like what we are experiencing at the moment, which is the global pandemic. You can also use it in case of what you identify as an "emergency".

• If your monthly expenses are 10,000 pesos or about $200, then you should save 30,000 ($600) to 60,000 pesos ($1200) or even up to 120,000 pesos ($2,400) to build your Emergency Fund that will last up to 12 months.

2. If you already have appropriate insurance coverage

• Having life insurance will save your immediate family from financial problems when you pass away. And having health insurance will save you from a lot of medical bills in case a critical illness hits you.

3. If you have Passive income (actual cash inflows, not paper gains or drawing)

• Passive income is any income earned with very minimal or even without active involvement, like interest income, dividends, and royalties. The income you get from renting out your properties can also be included as passive income.

4. If you have a net worth that is appropriate to your age

• Your net worth is simply the total value of all of your assets or anything you own with monetary value minus all of your liabilities or obligations such as loans and mortgages. Your net worth also depends on your age, status, lifestyle, and career. Since all of us have different lifestyles, one's net worth is different from the other. However, one formula to know how much should be your ideal net worth is to multiply your income by your age and divide it by 10.

Net Worth = Age X Income ÷ 10

5. If you have a Financial Plan

• A financial plan or goal is something long-term, not just a plan of your finances for the next 3 or 5 years. You can also include your retirement plan, house plan, car plan, and any plan that involves finances.

6. If you have no debt

• Debt should be paid off first before or while you are building your emergency fund to avoid any financial disaster in the future. For me, having debt is like digging up your own grave so it is a must to clear your debts before thinking about retiring early and to actually achieve financial freedom.

7. If you have investments

• Investments are important to achieve having passive income that will generate actual cash inflows so that money will still keep flowing in even if you are no longer working. Investing in real estates such as having an apartment and house suitable for rentals will guarantee a monthly cash inflow. There are also other investment vehicles out there such as stocks, bonds, and crypto.

And that's it! These are just guides for you and me to achieve the financial freedom that we are aspiring for. It's not necessary that you should have all of these before you retire but it would put us at peace if we follow these requirements.

Anyway, Cheers to Retiring Early!