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5 Steps to Early Retirement

Success stories are regular features of our Motley Fool Rule Your Retirement newsletter service -- profiles of people who have become financially independent. One of the most remarkable stories is that of Billy and Akaisha Kaderli. At age 38, they left their fast-track lives, made the Caribbean their home base, and started traveling the world. We caught up with Billy and Akaisha on the island of Boracay in the Philippines. Here, the Kaderlis have turned their retirement wisdom into a winning formula.

Committing to your retirement doesn't have to be complicated or difficult. Now is the perfect time to get started on your roadmap for retirement success. We're living proof -- we followed these simple steps 20 years ago, and they worked for us. Here's what we did in order to retire early.

1. Track spending.
Take a close look at your spending on a daily basis. Once you start doing so, you'll be amazed at what you're spending your money on. Businesses must look at their cash flow in order to stay afloat; why shouldn't you? It only takes a few minutes a day once you set up your system. After a month or two, you'll discover where you can reduce your expenses. Within a year, you'll be in control of future spending.

2. Save a lot.
Once you have control of your spending, save that extra money for your future. If you're younger than 30 years old, a good target is to save 10% of your gross income -- not your take-home pay, but the full amount of your salary before taxes and other deductions. After a short time, you won't miss the difference, but your savings will grow substantially. If you're over 30, increase your savings rate to 15% or more if possible. Take full advantage of employer-sponsored plans like 401(k)s, matching contributions, and any other retirement benefits you receive -- but don't include them in your savings percentages. That should be on top of what you're already saving on your own.

3. Invest wisely.
Learn about investments, become your own expert, and keep things simple. You don't need to impress your friends with financial terms just so you can look knowledgeable. It's all about your results; if you can't outperform the S&P 500 Index year after year, take a look at simply matching it through index investing.

4. Put peer pressure into perspective.
Social pressure to spend can be subtle and pervasive, and it can divert you from your commitment to retire early. Marketing specialists tell you that if you only buy this new product, car, house, or membership, your lifestyle will improve. It's reasonably easy to tune out that marketing message, but you have to handle your friends with a little more tact. Trying to match the spending of our peer group is a surefire way to derail financial goals. Decide now that you don't have to keep up with their consumption to fit into the crowd. The choice is yours -- not theirs.

5. Keep your eye on the prize.
Set realistic goals and keep to your plan. The amount you save, how you invest, and when you plan to retire may differ from your colleagues and others. No one will be as dedicated or determined as you are to reach your objectives. Put these goals somewhere you'll see them often, to remind you to keep you on course. Every time you get sidetracked by spending a little bit more, succumbing to peer pressure, or choosing not to put extra money into your retirement funds, you're literally delaying your retirement date by weeks, months, or perhaps even years. Stay focused.

It's never too early or too late to begin planning for your own retirement. To begin your journey, try a risk-free trial to Rule Your Retirement.

In 1991, Fool contributors Billy and Akaisha Kaderli retired from the brokerage and restaurant businesses to a life of international travel. Visit their website at RetireEarlyLifestyle.com, and check out their new CD book, The Adventurer's Guide to Early Retirement.


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