My retirement plan

Is it possible to achieve financial independence and leave the rat race at 40?

The answer is yes! Is it absolutely necessary to establish a sophisticated retirement plan?

The answer is no! Is this retirement plan easy to follow?

The answer is no! It takes a lot of determination.
I have read many books and blogs on personal finance, retirement planning, financial independence and many related topics to gain more knowledge in these areas. That said, I realized that simple changes can help you achieve financial independence at a young age.

The retirement plan I created to achieve financial independence at 40 is simple, sometimes boring, but very effective!
It consists of:

1. Assess your current financial situation (budget, net worth, savings rate, credit score, etc.)
2. Pay off your debts (if applicable)
3. Increase your savings rate (for example, by living according to your needs rather than your wants)
4. Invest your savings (for example, in the stock market or real estate)
5. Reassess your situation regularly
   This retirement plan does not apply to everyone and can be adapted according to YOUR needs and YOUR goals.

The first step in my retirement plan is to assess your financial situation by creating a budget.
You can use software or a mobile application, but personally, I use a simple Excel file.
The purpose of a budget is to keep track of your income and expenses, but above all to understand where your money is going.
You can also calculate your savings rate. It is important to maintain this budget for several months to ensure that you do not forget any expense items.

The second step in my retirement plan is to pay off your debts.
For now, you can leave the mortgage aside! Here, we are focusing on consumer debts…
In the previous step, you identified your debts, for example: credit card debt, student loan, car loan or personal loan.
To create long-term wealth, you absolutely must pay off your debts as quickly as possible. To do this, there are two well-known strategies in the field of personal finance: the “avalanche” method and the “snowball” method.
The most effective method depends on your personal situation and preferences. If you are looking for psychological motivation and a quick sense of accomplishment, the “snowball” method may be better. However, if you are aiming to minimize total costs and are willing to be disciplined, the “avalanche” method is usually the most economically rational.

The third step in my retirement plan is to increase your savings rate.
You already calculated your current savings rate in the first step and it probably came as a shock. So your goal should be to increase this savings rate. But by how much?
You must first determine the amount needed for your retirement, using the “4% rule” or the “70% rule”.
Personally, I think the method that is based on expenses (4% rule) is the most appropriate.
How can I increase my savings rate? There are several simple changes you can make, such as reducing your recurring expenses and your transportation expenses.
Ask yourself questions. Do I need a new Canada Goose jacket? Do I really need the new iPhone? Do I need a BMW to get from point A to point B? Can I take public transit? Do you need a 50-channel HDTV package? Another simple change, but perhaps the most important, is to get into the habit of paying yourself first.

The fourth step of my retirement plan is to invest your savings in the stock market or real estate, depending on your preference and your investor profile.
Personally, I decided to invest in the stock market.
At this point, you have assessed your current financial situation, repaid your debts (or are about to complete them), changed your lifestyle (overconsumption) and increased your savings rate.

The fifth and final step of my retirement plan is to reassess your situation regularly (personal and financial situations, stock market investments, etc.).
You have established a budget and invested your savings. That’s good, but it doesn’t stop there. You must adjust your budget following changes in your personal life (for example, the arrival of a child) or the addition of a source of income.
In addition, you must constantly analyze your expenses and reduce them as much as possible. It is even more important to limit or even eliminate recurring expenses.

My retirement plan to achieve financial independence at 40 is simple and boring… but it works!
It’s now up to you to decide which plan you want to adopt.
The important thing is not the expected retirement age. It could be 40, 45, 50…
The important thing is to set a goal, put an action plan in place… and implement the game plan ASAP!
Don’t forget to measure progress (budget, net worth, savings rate).
On the road to financial freedom… 🙂