Where do you see yourself 30 to 40 years from now? Hopefully, you are living your happy retired life dream. Me personally, I do plan to be retired, traveling the world and serving the community even more than before retirement while living in a paid off house without any debt. As we all dream, we need to understand one simple truth. That is, our dreams will only become a reality if we act today and work hard right now. The Employee Benefit Research Institute recently reported that approximately 1 in 4 workers say they have less than $1,000 saved for retirement. That is unacceptable.

We have to change our behavior and start being responsible for our future selves today. Remember, “Take steps today to make leaps tomorrow?” Here at Habesha Finance our belief is that there are no shortcuts to success. You have to work hard and be willing to sacrifice along the way to your retirement dreams. And so today I am going to talk about 4 basic ideas to help jumpstart your goal of turning your retirement dream into a retirement reality.

Stay Away from Debt

Get out of debt and stay out of debt. Without getting too detailed on the different types of debt out there, just know that being debt free is what I encourage. Whether it’s student loans, a car note and even your home, the faster you clear all your debt the faster you can start letting your income and money work towards retirement while still enjoying all the finer things in life. When you have debt you play this game of walking into a revolving door and never getting out. Also, when you are debt free you don’t have to worry about taking on the risk of borrowing money and living a life of paying people back.

You have to understand when you introduce debt into your life, you become stuck under that debt until you are able to clear it out. That’s not a good feeling to have. Imagine all the investing and saving you can do for your future and the future of your family when you are bringing home paychecks without the burden of debt! So with the exception of a home loan for your personal residence, stay away from any other type of consumer debt.

Owning a Home

Become a homeowner and pay off any debt on the home fast. Understand if you want to rent the rest of your life that you will pay more in the future than you do today due to inflation. But if you can find a home you can afford to buy, keyword “afford,” then you will save so much money in the long run as you work aggressively towards paying off your home. Not to mention that paid-off house, condo or townhouse now becomes an asset of your total net worth, meaning home ownership is a very big positive!

So what do you do if you’re prepared to buy a home? Have at least 20% ready for a down payment. Get a 15-year fixed-mortgage where the monthly payments are ONLY 20-25% of your monthly take home pay and this includes principal, taxes, insurance and interest. So if you bring home $4,000 a month after taxes, this means your monthly payment should be no more than $1,000. There are no exceptions and I am not sorry. The reason is because I don’t want to see what has happened to so many homeowners where they took on too much house their income could afford.

And remember, it’s always going to be a 15-year fixed-mortgage. I want you to have a home payment for no more than 15 years of your life. And in the process you need to start adding extra payments to help you pay the home off in 7-10 years! You can do this, but you have to be honest with yourself and be mature enough to accept the reality that not every house is going to be a good choice. If the house you want is too expensive according to the rules above then you have to be a big boy or a big girl and find another house. Remember the goal is retirement and every choice you make today will either help you get there faster or slow you down.

Invest

Invest. I talked about this last week and if you didn’t get a chance you should scroll down to last week’s blog and check it out. Investing is such a critical part of your retirement that you need to start as early as you can. I’ve done the math for myself and if I was smart with my income and paid off my debts by the time I was 25 (which was a very real possibility) I could have been investing into my 401k and had almost double of what I have today. And you don’t have to go work for a company to invest for retirement. You can open up your own IRA (Individual Retirement Account) and start putting aside a couple hundred dollars a month into a low cost index fund that will grow over the course of 30+ years significantly, thanks to compound interest.

So get with your financial advisor and start as early as you can. Some good financial companies to start your IRA with if you don’t have a 401(k) or 403(b) with your company are Fidelity Investments, Vanguard, Charles Schwab, and TD Ameritrade. Even if you do not want to invest, find a way to save, save, save. You can even look into rental properties that can be a great source of income for when you retire. Just remember to make sure your rental properties get paid off fast (same rules apply for your own home)!

Budget, Save, Live Below Your Means

Budget, save and live below your means. This might be the most important point I am going to make here. You have to start budgeting and living below your means, because you have a dream you are turning into a reality. Start asking yourself the difficult questions about how and why you’re struggling financially and change! Be wiser than the person you were yesterday and take those steps today so you can make those leaps tomorrow. Don’t buy a car you can’t afford just to impress people who won’t help you get out of the financial pit you will later find yourself in. Don’t get a house that is waaaaay too expensive, just because all your friends have big, expensive houses. And don’t book that overseas vacation all your college buddies want you to go on when you have student loan debt and credit card debt that are piling up on you.

Budget, save, and live below your means. I want you to enjoy life and take those vacations with your family, but don’t be dumb. Budget for all those things and remember to always keep a 6-month emergency fund in place for when stuff happens outside of our control, like losing a job or an unexpected death in the family. I want you to have fun, but don’t have fun in the name of stupidity. So one more time: budget, save and live below your means.

Final Verdict

If you want to retire with respect, then use these four points as a guideline and work hard towards that dream you and your family have. There are no get-rich-quick plans in this world and you need to run from anyone who tries to tell you otherwise. Retiring with respect means you work hard now and take action today to turn your retirement dream into a retirement reality. Retiring with respect means we take steps today to make leaps tomorrow.

Happy Retirement Quotes

I found these great retirement quotes and I thought I’d share a few of them here. For more of these quotes click here.

1. Think about it, now you never have to ask for a day off again. Happy Retirement!
2. Travel, relax, enjoy life and spend all the kids inheritance (they will never know ha ha ha). Best of wishes.
3. All the best for an amazing retirement! Enjoy your new chapter in life, where you become your own boss.
4. As one chapter ends, another begins, welcome to your new found freedom! 
5. A wife’s full-time job starts when her husband retires. Glad to see you got promoted!
6. Retiring means less responsibility and “almost” no work. Please let me know if you need help finding things to do, my garage could use a once over ha ha ha! Congrats (insert name)! 
7. Consider this an extended vacation that never ends… Only you don’t get paid days off ha ha ha!