Millennials may become tired because they're connected to their smartphone, but this generation may be on track for retirement. There is a movement that is gaining momentum in the younger group called FIRE, or financial independence that is retiring prematurely. FIRE means saving a high percentage of your income today to create a work-free tomorrow.
For many US households, saving is not self-evident. A Northwestern study from 2018 shows that one in three Americans saved less than $ 5,000. Even more worrying is that about a third of Americans have no pension at all. Low savings and uncertainty about social security and health care costs make many people retire for as long as possible.
But not all accept this reality. Some millennials use the concept of extreme downsizing to enable early retirement. By living economically and saving half or more of their income, these aspiring pensioners are building $ 1
Can you implement extreme downsizing in your life? It takes time and discipline. To save $ 1 million, you must invest $ 1,234 per month for 25 years with a return of 7%. It only takes 15 years to save $ 3,155. Read on to find five ways you can cut your household expenses so you can save for financial independence.
. 1 Exchange the ranch house for a tiny house.
Pensioners often rate downsizing as a strategy that saves money. Replacing a large home with a smaller one saves cash, eliminates a mortgage payment and lowers the property tax. But why wait until retirement to take this step? Let's say you downsize today and save $ 12,000 a year in mortgage payments and property taxes. Stow the money for 10 years and grows to $ 120,000 plus interest. If your savings target is $ 1 million, you're more than 10 percent of the way there.
. 2 Driving on two instead of four wheels
You can also make savings by rethinking your transportation strategy. Cars, especially new ones, are expensive. They buy insurance and pay for the gas and oil change. And then there is a write-off. If you exchange your new car (and the car payment) for a used vehicle, the payment will be canceled and your insurance will be reduced. And if you can rely on a bicycle and public transport, the maintenance and registration costs are also eliminated.
. 3 Clean your closet
How many shoes do you really need? Most people manage with three or four couples to bring them to the office, the gym and everything in between. Over the years you have probably collected some extras along with extra pants, sweaters, coats and watches.
All of these items are candidates for resale. Bring them to a thrift store for a quick buck or try to sell your old items at Poshmark or ThredUP. Whatever money you collect, it should be transferred directly to your savings account.
. 4 Clean up garage, basement and attic.
Garages, cellars and attics often collect things that you do not want to throw away. Old furniture, home accessories and sentimental bells and whistles are not good if they are hidden in the storage. If you have items that someone else would use and enjoy, plan a flea market or list them in a resale app like LetGo or OfferUp. You can sell old books and textbooks from your studies at Amazon or in antique shops.
. 5 Downsizing Costs
You may be familiar with the usual savings tricks when canceling cable and gym memberships. Maybe you make your own slats and you've also cut your food budget by learning how to cook. In addition, you have reduced your heating costs by 10% because your thermostat turned down to 62 degrees in winter.
You are already a thrifty living guru. Are there still ways to further reduce costs? Do you bet? Here are five more strategies you should consider.
Announce your internet and cable at home.
You can count on free Wi-Fi in the library or even at McDonald's in your area to stay up to date with your email. Switch to the hours you usually watch TV, read books, of course from the library, or play card games. Swap one or two inexpensive streaming services for cables if you have not already done so.
Switch to a cost-effective mobile rate.
Republic Wireless offers an unlimited call and text rate for 15 USD per month with the number contract required. For another $ 5, you can add 5GB of 4G LTE data.
Disconnect all unused devices from the mains.
Toasters and coffee pots consume electricity even when they are not turned on. Duke Energy estimates that unconnected equipment accounts for up to 20% of your electricity bill.
Switch to tea and use your tea bags again.
Tea costs less than coffee altogether – especially if you use reusable tea bags.
Take the cold water from your shower.
Do not waste the first explosion of cold water coming out of the shower. Either jump in directly and bear the cold or keep a bucket to catch the water. You can use it for plants and pets.
Small Steps to Great Savings
Downsizing your home is a big win, but adherence to minor lifestyle changes will continue over time. The next time millennials bring their own snacks to the quiz night at the bar, nod to them. After all, they're probably chasing FIRE.