If you’re reading this blog, I assume you are interested in retiring early. For us, early retirement will hopefully be achieved in eight years when Poopsie is 50 and I am 36. To some, 50 is not particularly early, but we’ll still take it.
There are many methods to retiring early, most of which involve minimising spending and therefore increasing savings/investments.
But today, I’d like to give you my No. 1 piece of advice for retiring early.
Track your spending.
That’s right. Track every single dollar you spend.
Without knowing exactly where your money is going, you cannot make decisions on reducing costs and saving more. I guarantee you that when you start tracking your spending, you will be surprised to see where your money is going. Little things do add up! But, at the end of the month when you see how many cups of coffee you bought or how many times you had take out, you’ll be in a position to start making cuts and your early retirement date will only get closer.
So how do you track your spending?
For some, the manual method works best. This involves carrying around a notebook and pen and entering everything you spend into it. Nowadays, this can be done in the Notes application on your phone. There are also many third party applications like Evernote. As most people carry their phone everywhere with them, this is easily done.
I haven’t had a great deal of success with the manual method. I’d go well for a day or two but pretty soon I’d forget to add stuff in and the whole exercise was a waste.
There are some great ways to automatically track your spending. For any American readers, Mint is very popular and the Frugalwoods rave about Personal Capital.
For Australian readers, I highly recommend you get a PocketBook account. PocketBook pulls data directly from your bank account or credit card (or both) and tracks every expenditure you make. You can then categorise your expenditure and run reports for selected time periods to see how much you have spent and on what. If you use cash, there is also the option to input these expenses.
For the security conscious, PocketBook is secure and they only have read access to your accounts- they cannot make any purchases or move any money.
We run PocketBook reports monthly and it’s a fantastic way to track our spending.
Whether you choose the manual or automated route, tracking your spending is imperative if you want to get control of your finances and retire early.
Once you’ve mastered tracking your spending, it will be time to reduce your costs as much as possible. In future posts, I’ll show you how Poopsie and I save money everyday.
What’s your No. 1 piece of advice for retiring early?