3 Steps to retiring early

South Africans today are struggling to retire. With inflation eating away at our wealth and the lack of financial knowledge, too many people are forced to work into their late 60's and 70's or alternatively, live their retirement years struggling financially.

We all want to retire as soon as possible. The key to this is PASSIVE income – Income that is generated 24/7, no matter where you are or what you are doing. Take a moment to visualise a life where you don’t have to rely on your employment salary for financial comfort…

Unless you are a poker star, born into a wealthy family or possess Warren Buffett’s investment expertise, there is no short-cut in achieving this passive income. However with discipline, commitment and a few sacrifices, the three steps below can help you achieve this.

Leverage the bank's money and buy a property. Since the price range of property is so wide, this strategy can fit anyone’s budget. Property provides capital growth as well as passive monthly income. And the fact that you can use the bank’s money to acquire this asset makes it even more attractive. In 20 years when you have paid off the bond using mostly rental income from your tenants, you will have a substantial asset to your name as well as a source of passive income.

However, investing in property isn’t as easy as it sounds. It is undeniably a huge financial commitment that could backfire and cost you dearly. So do your homework! If done properly, this strategy can be very beneficial. Something I found useful before investing in property - Call rental agents (as many as you can) and get information about tenants’ preferences in that area. It will give you an idea of the property you should be looking out for.

Invest in a Retirement Annuity (RA). The RA is an amazing way to grow your wealth and it probably is easier and less scary than investing in property. The RA is similar to any other investment plan in that your money gets invested into the markets. However, the RA's X-factor is the tax benefit. The tax benefits are so rewarding, that if you add up the ‘tax savings’ to the actual investment returns, it is close to impossible to find a better way to grow your wealth. There is a limit to how much you can save on tax so consult with a financial planner to determine the optimal amount that you should be contributing to an RA.

Invest in educating yourself. If you are already highly qualified then this step may not apply to you. For the majority though, there is always more you can study to improve your own skills and therefore increase your income. Determine the exact skills required by the company in order to get your promotion or your raise and then decide on what to study. Go to the extent of speaking to your manager or your HR department. More often than not, if you do the numbers, education offers the best ‘return’ on your ‘investment’.

Questions? Let's chat.