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7 Ways to Boost Your Odds of Early Retirement

Joe Udo

Early retirement certainly sounds good. Wouldn't it be nice to go off and do your own thing instead of having to come to the office to crank out another TPS report? Early retirement is also achievable if you save diligently. Here are some simple steps to help you get there someday:

Back off Starbucks. Did you know the average American spends about $1,000 on coffee? I know it's only a few bucks each time, but those little purchases add up. Wouldn't it be nice to have an extra $1,000 in your bank account at the end of the year instead? You can brew your own coffee instead of hitting Starbucks all the time.

Cut the cord. There are a ton of great TV programs that I'm hopelessly addicted to including "The Walking Dead", "Game of Thrones" and "Big Bang Theory". However, I don't even have cable TV. I get all my DVDs from the library. If you want more convenience, then perhaps streaming through Netflix might work for you. Cable TV is ridiculously expensive, and I can't believe someone would pay hundreds of dollars a month for it. Cut the cord and save some money instead. You shouldn't be watching that much TV anyway.

Pay off your debt. The average U.S. household carries credit card debt worth about $7,500. I don't have any credit card debt. It's crazy to owe so much money to the credit card companies. You'll have to pay a ton of interest every month, and that will make it impossible for you to save. Set aside a little money every day to pay down your debt, and get that debt out of your life.

Open a high interest bank account. If you haven't taken a close look at your checking and savings accounts in a while, you might be surprised. These days the banks are paying very little interest. I recently checked and my local banks are paying 0.1 percent interest on saving accounts. If you have $100, you'll receive about 10 cents of interest per year. You can get more interest by moving your money to an online savings account. Another alternative is a qualification checking account. These accounts typically require you to make a number of purchases with an associated debit card per month, set up direct deposit or limit the number of withdrawals.

Deposit the extras. When you save money from getting rid of coffee purchases and cable TV, you need to deposit it into your saving account. Don't leave the extra money lying around because you will spend it.

Invest in I bonds. Once you have an extra $50, then you can purchase I savings bonds. Head over to Treasury Direct and open an account. I bonds are issued by the U.S. Treasury and are backed by the U.S. government. It's one of the safest ways to invest your money. The interest rate is indexed to inflation, so the money you invest today will retain its purchasing power.

Invest in the stock market. The stock market might be intimidating to new investors because of the volatility, but over the long term stocks have outperformed all other investments. If you don't like the crazy ups and downs, you can just invest a little bit every month in an index fund. Over 20 to 40 years, you should still come out ahead. Of course, you still have to do your own research because past performance does not guarantee future returns.

Building a nest egg is pretty simple. You don't even have to cut off coffee and TV completely. You just need to examine your lifestyle and see where you can trim the fat. Use that extra money to pay off debts. Once the debts are gone, then you can save and invest. Investing in I bonds and index funds is a great way to start. These small steps will help you reach retirement earlier.

Joe Udo blogs at Retire By 40 where he writes about passive income, frugal living, retirement investing and the challenges of early retirement. He recently left his corporate job to be a stay at home dad and blogger and is having the time of his life.

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