15 Of The Best Money Books For Young Adults – Learn How To Live The Life You Want

Are you looking for the best money books for young adults?

best money books for young adults

best money books for young adults

Today, I want to talk about the best money and life books for new high school graduates, college graduates, and other young adults. These would be great for graduation gifts, or just for yourself!

I wasn’t always good with money when I was younger. I bought more clothes than I needed, financed a new car, spent a lot going out to eat, and spent a lot of money on things I didn’t need. It took me several years to realize how my spending habits were affecting the rest of my life.

I think this is fairly common when you’re younger, and there are lots of great financial books for young adults that can help you understand how money works and how to prepare for the future. 

The best money books for young adults explain personal finance topics like saving, investing, making more money, and more. And, reading them when you’re young can help you get on the right track with your money from a young age. 

Rather than spending years playing catch up with your money, you can get started on a great path now. 

I often get questions from young readers who are looking for help with their money, and I also get questions about how to help a young person with their money. These books are a great gift for yourself or someone you know.

For me, I love to give books as gifts, especially personal finance books for high school and college graduation gifts. And the best money books for young adults on this list make for great gifts – I’ve even given some of these books as gifts.

If you want to change your life, then I recommend that you start reading personal finance books. Yes, money is not everything, but improving your financial situation can help you gain control of your life.

Related: 6 Simple Steps That Will Teach You How To Write A Check

There are many different books listed below, so you will be sure to find at least one or two that meet your needs.

The best personal finance books may help you learn how to:

  • Understand basic financial concepts in an easier way
  • Reach financial independence or retire early
  • Take on your own yearlong shopping ban
  • Deal with and pay off debt
  • Better manage the 168 hours a week you have
  • Become more confident
  • Invest for your future
  • Choose your own dreams and adventures
  • Find the best path to pay off your student loans

And more!

Here are 15 of the best money books for young adults.

 

1. Broke Millennial

Broke Millennial was written by Erin Lowry, and is a must-read for young adults. She makes the topic of money entertaining, fun, and relatable for young adults. You won’t be bored with this money book!

Erin gives readers a step-by-step plan to stop being broke, and she discusses many topics, from tricky ones like how to manage student loans, how to discuss money with your partner, and more.

Please click here to check out Broke Millennial.

Another one of the best money books for young adults is Broke Millennial Takes On Investing. Erin recently published this one and it’s a great read, as it covers the topic of investing without making you feel dumb.

 

2. Work Optional: Retire Early the Non-Penny-Pinching Way

Work Optional is another one of my top picks for best money books for young adults, as it was written by one of my favorite writers, Tanja Hester. This personal finance book will show you how to reach financial independence so that you can live the life you want. 

I know retirement feels very far away when you’re younger, but this book explains how early retirement is a possibility if you start saving money now. Yes, retiring before the traditional age of 65 can happen, and it starts with the kind of guidance you’ll get in this book.

Please click here to check out Work Optional: Retire Early the Non-Penny-Pinching Way.

 

3. The Year of Less by Cait Flanders

If you’re looking for one of the best financial books for graduation gifts, check out The Year of Less by Cait Flanders. In this book, Cait writes about her yearlong shopping ban which will inspire you to simplify your own life and address your relationship with material possessions.

Cait talks about how for a full year, she only bought groceries, toiletries, and gas, and how it impacted her life. This is a great read for young adults as it is so easy to get into a spending cycle when you get your first real job and start earning larger paychecks.

Please click here to check out The Year of Less by Cait Flanders.

 

4. Dear Debt

Dear Debt was written by Melanie Lockert and focuses on people’s relationships with debt in a funny and endearing way.

Dear Debt is a must read for anyone who has debt or is taking on debt. Melanie shares her personal experience paying off $80,000 of student loan debt, how it affected her mindset, and more. This is one of the best money books for young adults because it’s a personal story about overcoming debt. There’s also tons of great money advice that will help others overcome the debt that may be holding them back.

Please click here to check out Dear Debt.

 

5. 168 Hours: You Have More Time Than You Think

Do you ever wish that you had more time in your week?

This book, written by Laura Vanderkam, focuses on helping people manage their time better so they can focus on what really matters.

Laura writes about tips and tricks to live a more efficient life. She teaches you how to prioritize things in your life, from how to get enough sleep every night to finding time for hobbies you’ve been wanting to try. You will learn how to use your 168 hours a week to make your life better, as you’ll learn many great life-changing strategies.

Please click here to check out 168 Hours: You Have More Time Than You Think.

 

6. How to Win Friends and Influence People

How to Win Friends and Influence People was written by Dale Carnegie in 1936 and has sold over 15,000,000 copies worldwide. This is one of the most best-selling books ever, and for good reason!

This book will show you how to approach situations differently, become more confident, and get people to like you. This is one of the best money books for young adults that people of all ages will benefit from, because this book is all about living a happier and more successful life at any age.

Please click here to check out How to Win Friends and Influence People.

7. Quit Like A Millionaire

Quit Like A Millionaire was written by Kristy Shen and Bryce Leung, who are well-known people in the FIRE community. And, if you’re not familiar with FIRE, it stands for Financial Independence Retire Early. Everyone approaches FIRE differently, but the point is to stop letting money hold you back from living the life you want.

Kristy retired early at the age of 31 with a million dollars, and has a very inspirational story. In this book, she explains how that was possible and how it can be a reality for you too. This is a great guide on how to save more money, retire early, and live the life that you want.

In this book, you’ll learn a step-by-step guide on how to reach success, whatever that may mean for you. This is a fun and inspirational book that will open you up to new possibilities and opportunities.

Please click here to check out Quit Like A Millionaire.

 

8. Get Money

Get Money is a book by Kristin Wong, and it’s an engaging read that will teach you how to manage your money.

Kristin gives you a step-by-step personal finance guide that will show you what you need to do in order to stop letting money control your life. You will learn how to create a budget, pay off your debt, build a better credit score, negotiate, and how to start investing.

Please click here to check out Get Money.

 

9. Financial Freedom: A Proven Path to All the Money You Will Ever Need

Financial Freedom was written by Grant Sabatier, who decided that he needed to change his life by learning how to make more money.

Here’s a bio I found about Grant to show you how awesome he is!

“In 2010, 24-year old Grant Sabatier woke up to find he had $2.26 in his bank account. Five years later, he had a net worth of over $1.25 million, and CNBC began calling him ‘The Millennial Millionaire.’ By age 30, he had reached financial independence. Along the way he uncovered that most of the accepted wisdom about money, work, and retirement is either incorrect, incomplete, or so old-school it’s obsolete.”

In his book, Grant writes about how to reach financial freedom through steps such as building side hustles, traveling the world for less, building an investment portfolio, and more. 

Please click here to check out Financial Freedom.

 

10. The Simple Path To Wealth

The Simple Path To Wealth was written by JL Collins, and it’s one of the most popular and best money books for young adults that’s available.

Collins writes about many important financial topics in his book, such as how to avoid debt, how to build wealth, what the 4% rule is and how to use it to your advantage, and more.

This is an easy book to read, and it makes complicated personal finance topics much easier to understand. Many people have said that JL Collins is the reason why they were able to retire early, thanks a lot to his website and book.

Please click here to check out The Simple Path To Wealth.

 

11. Student Loan Solution

Student Loan Solution was written by David Carlson, and it’s a great book for anyone who has student loan debt.

Student loans can be extremely difficult to understand, as there is so much different terminology as well as different ways to pay them back (such as loan forgiveness, consolidation, and so on). This book explains a 5-step process that will help you to better understand your student loans, the best ways to pay them off, and more.

Please click here to check out Student Loan Solution.

 

12. The Millionaire Next Door

The Millionaire Next Door is another classic personal finance book, and it was written by Thomas J. Stanley.

In his book, he writes about the common traits of those who are wealthy, and how the wealthy can be even someone such as your neighbor, even though you might not realize it. This book shows readers that anyone can retire with wealth, not just your traditional multi-millionaires living in huge mansions with airplanes.

This is one of the best finance books for graduation gifts because it will make you rethink what it means to be rich, which is important to understand from a young age.

Please click here to check out The Millionaire Next Door.

 

13. The Infographic Guide to Personal Finance: A Visual Reference for Everything You Need to Know

The Infographic Guide to Personal Finance, written by Michele Cagan, is one that I learned about from my readers. What’s great about this book is that it gives you a visual guide to important personal finance topics, and many people learn better from visuals.

This book is different in that it is full of infographics, which make it fun and easy to read. You will learn how to find a bank, build an emergency fund, how to pick health and property insurance, and more.

Please click here to check out The Infographic Guide to Personal Finance.

 

14. Choose FI

Choose FI was written by Chris Mamula, Brad Barrett, and Jonathan Mendonsa. These guys are behind one of my favorite Facebook communities, Choose FI, and they explain how to reach financial independence and retire early. 

While retiring early may seem out of reach if you’ve just graduated, this book teaches you how to “choose your own adventure” and improve your financial situation.

Please click here to check out Choose FI.

 

15. I Will Teach You To Be Rich

I Will Teach You To Be Rich was written by Ramit Sethi and is a excellent book for beginners. It would make a great gift for a recent high school or college graduate.

Ramit’s I Will Teach You To Be Rich is packed full of great lessons, and it is written in a fun way. He covers the basics of personal finance such as budgeting, saving money, investing, and more.

Please click here to check out I Will Teach You To Be Rich.

What do you think are the best money books for young adults?

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Source: makingsenseofcents.com

15 Lessons From Regular People Who Achieved Financial Independence

To gain financial independence for retirement, use the lessons of those who have retired early.

total financial independence

The Big Takeaways…

    • Financial independence can be achieved, but it’s about combining lifestyle ambitions with reasonable financial strategies.
    • Financial independence comes with some sacrifice, so it’s important to consider the consequences before committing yourself to an early retirement.

Most people struggle and worry about being able to retire in their mid to late 60s. At that point, you are expected to have hundreds of thousands (maybe even millions) of dollars in your retirement accounts, get additional money from Social Security, and also get some government assistance with healthcare insurance. Even then, retiring securely can feel impossibly hard. What you really want is total financial independence – forever.

Maybe you are already retired and have a dreadful feeling that you simply don’t have enough.

Many people have been there, done that, and retired. Some even have a passion to teach others how they did it via their writings in books, blogs, and online courses.

This past week, I read through hundreds of articles from dozens of blogs to discover 15 of the top lessons from regular people who have achieved total financial independence.

If you save 50% on an item, that sounds pretty impressive. But if that item was a bottle of $1 shampoo, you really only kept 50 cents in your pocket.

J.D. Roth from Get Rich Slowly explains that if you want to retire early, you’ve got to focus on your high-cost items. Namely, your:

  • Home
  • Car
  • Food

The average person will spend over $2,000 a month on these categories alone. If you want to retire or retire early, the solution is simple: spend less. And, you can do it easily by focusing all your efforts on reducing the big dogs – home, car, and food expenses.

Need more inspiration? Here are 8 ways to save BIG. Or, listen to the podcast interview with J.D. Roth.

When do you want to retire? In 5, 15, 25 years? The math behind how much you need to save to achieve these targets is shockingly simple. Just ask Mr. Money Mustache – an engineer that retired when he was only 30.

Even though the math is supposedly simple, MMM made it even simpler by putting together a target savings rate table.

If you currently have zero and want to retire in:

  • 5 years, you’ll need to save 80% of your income
  • 15 years, save 55% of your income
  • 25 years, put away 35% of your income

Most of you have already been working for a few decades, so these numbers might not mean as much as it does for those that are just starting out (especially if you haven’t been putting 80% of your income away all your life). So, what numbers are relevant for you?

If you have consistently put away:

  • 10% of your income, you’ll likely have to work for 51 years before you retire
  • 15% of your income, your time in the workforce is 43 years
  • 20% of your income, you’ll probably have enough money to retire after 37 years in the workforce

Want to retire sooner? Simple. Just up your savings rate.

Try different scenarios in the top rated NewRetirement retirement planning calculator.

When most people retire, they assume they’ll never work another day in their lives, and, if they have to, they consider themselves a failure in retirement.

Jonathan Clements, from HumbleDollar, disagrees.

According to Jonathan, “Working a few days each week could greatly ease any financial strain, while adding richness to your retirement.”

So if you have to (or want to) work in retirement, don’t sweat it. There are countless others that do the same.

Explore 14 reasons retirement jobs are the best and listen to our interview with him on the NewRetirement podcast where Clements discusses money, behavior, and happiness.

Before putting together a complex assortment of facts and figures, Darrow Kirkpatrick (retired at 50 years old) champions the idea of keeping things simple.

“The best way to get a useful model going is to input a small number of initial assumptions, then calculate and check the results carefully, year by year. Once you are certain those initial numbers are behaving as expected, you can begin adding more data, more financial events, and refining your model.”

He compares retirement planning to constructing a puzzle. You don’t try to put all the pieces together at once. You start with a corner, add a piece, add another, and then slowly put together the entire puzzle one piece at a time. The same should be true with your retirement planning.

Instead of putting all your numbers into a complex tool right off the bat, put in only a few, confirm the number, and then go back and model in other likely scenarios. In the end, you’ll be much more confident in your number and you’ll understand it completely.

This approach is fully supported by the NewRetirement retirement planning calculator. Users start by inputting a relatively simple set of data – estimates are okay. You can view results and start building a more complete plan. Or, simply run different scenarios and keep your information updated over time, making adjustments as necessary.

When was the last time you updated your numbers? We recommend quarterly at least. Want ideas for scenarios to run? Try these.

There are tons of people today that have absolutely no idea how much they spend from month to month. And, not only do they not know the amount that they’re spending, they probably couldn’t even tell you where half of it is going.

If you have absolutely no idea where your money is going today, you have little chance of grasping where it will go ten to thirty years from now.

In Darrow Kirkpatrick’s book, “Retiring Sooner,” he discusses several ways to assess your living expenses quickly and easily. So if you’re one of the people who doesn’t know where your money is going, take some notes from DK and get a handle on your spend today so that you can have a blissful, easy retirement.

When you think of regrets in retirement, you might only consider the regret of retiring too early and running out of money, but that’s not the only outcome you should fear.

Physician on FIRE (retired at age 39) warns us also of retiring too late.

If you run all the scenarios in all of the models and you’re safe in every one, then you waited far too long to retire. You’re not going to:

  • Get cancer
  • Have Alzheimer’s
  • Get into a car accident
  • Experience 3 stock market crashes
  • Lose your pension, and
  • Get sued

If all of those things happened to you, it honestly doesn’t matter if you can cover all the expenses. Your life is going to be difficult regardless.

The point of modeling is to protect yourself against the likely fears, not every one. Wait too long to retire, and you’re going to regret it for the rest of your life. Sure, your kids might enjoy the millions that you’ll never be able to spend, but I bet they’d much rather have your time instead.

The Wealthy Accountant, Keith “Taxguy,” is certainly a guy you want to listen to. He’s worth over $12 million and hasn’t held a conventional job since he was 22 years old…

He says it plain and simple:

“When you are in debt the clock works against you. Every morning when you wake—weekends, holidays, sick days, birthdays and work days—you are already behind. The mortgage, credit card, car loan, et cetera, all tacked on interest the second after midnight. Long before you rolled out of bed and poured your first cup of coffee you need to work to pay the interest before you have money for food, clothing, shelter or entertainment.”

The takeaway is that debt is just adding to your expenses. Pay your debt off as fast as possible and invest heavily once they’re gone. It’s easy to do once you don’t have a payment in the world.

Most people go to the bank and ask the question, “How much will you lend me?” The bank tells them the maximum that they’d be comfortable forking over, then the borrowers go out and find the best house for that amount of money.

Without realizing it, these folks just became house poor. Hopefully, they really love the house, because they won’t have enough money to do anything outside of those four walls for many years to come.

Passive Income MD gives us a great rule of thumb when it comes to getting a mortgage – never exceed 3 times your annual income.

If you are currently in over your head, downsize. You won’t regret minimizing your debt down the road.

You hear this all the time, but are you actually doing it? Are you putting the maximum amount allowed into your 401(k) each year? Joe Udo, from Retire by 40, admits that he didn’t max it out every year, but he only missed his first couple when he relented to his high-performance, stock chasing mentality got the better of him.

By maxing out his retirement nearly every year, he was able to build up a $640,000 nest egg before his 40th birthday. Not too shabby.

If you still haven’t started to max out your contributions, it’s better late than never. Do nothing and you’ll have way more regrets than if you get started today.

If you’re over age 50, be sure to use catch up contributions (whether or not your employer offers a program or not).

In 2012, Justin, from Root of Good, earned $140,000 and paid just $600 in taxes. In 2013, he did even better. He earned $150,000 and paid $150.

“We didn’t go anything sneaky or illegal,” Justin explained. He and his wife simply invested in all the tax-advantaged accounts:

  • 401(k)s
  • Traditional IRAs
  • Health Savings Accounts
  • 457
  • And a 529 College Savings Account

That, and they paid for childcare with a Flexible Spending Account through his wife’s work.

His motto is to keep things simple, but also to keep the government’s hands off his money. If you can do this just half as well as Justin, you’ll be well on your way to total financial independence.

“Saving a high percentage of income is only half the battle. You can’t just put fat stacks of cash under your mattress and expect to get rich.” – Go Curry Cracker

If you can earn 10% a year, it takes approximately seven years for your money to double. In another seven years, it would double again. Wait another seven, and it doubles again.

You’ve actually got $800,000. ($100,000 becomes $200,000 which doubles to $400,000, and then doubles one more time to make $800,000). If you could hold off another seven years, you could have yourself a cool $1.6 million. Not too shabby when you consider that you only had $100,000 28 years ago. That’s the power of compounding.

Put that money under your mattress and you’d have just $100,000. That is, unless you had a house fire.

As Bill Bernstein said in his NewRetirement podcast interview:

“I’m going to sound kind of insensitive and cruel, I suppose, but when someone tells you that [that they are not invested and are holding cash], what they’re effectively telling you is that they’re extremely undisciplined. And they can’t execute a strategy and that’s the kind of person who probably does need an advisor. If you sold out in 2007 or 2008 and you’ve been in cash ever since, you’ve got a very seriously flawed process and you’re probably managing your own money.”

You have got to be invested in order to get ahead.

If you retire at age 60, you could easily have 30 years or more of retirement life ahead of you. When you were 30, could you have predicted you’d be where you are at age 60?

Of course not.

The same is true for your retirement years, “And that’s okay!” explains Steve from Think, Save, Retire (retired at age 35). You can do all the planning and forecasting your want, but you’ll never be able to predict what will happen to you personally, professionally, relationship-wise, or financially over the next 30 or more years.

In early retirement, Steve thought he was going to:

  • Exercise more
  • Blog more
  • And read more

He doesn’t, and for good reason. All reasons he hadn’t thought of when he handed in his two weeks’ notice.

Be ready to be flexible and able to make updates to your overall financial plan.

Sam at Financial Samurai is a smart guy. After all, he worked as an investment banker for Goldman Sachs for 13 years. Very few have those credentials on their resume.

After all that experience and knowledge of the markets, his advice to achieve early retirement is not a stock tip and not even a sector analysis. His advice:

Keep it simple.

Spend less, earn more, and invest all you can. That’s it. There’s power in that message, especially considering the source.

ESI Money retired in his early 50s and has practiced exactly what he’s preaching today. His message:

“Invest for growth and then income.”

What does that mean? He goes on to explain and outlines the following:

  1. Max out your 401(k) and invest in index funds (growth)
  2. Invest in rental properties (a combination of growth and income)
  3. Consider person to person (P2P) investing (income)

Also, option three could include annuities – another tool that helps build up a consistent income for your retirement years.

Why growth, then income? Simple. You first want to get your nest egg going and grow your investments quickly out of the gate so you can capitalize on compound interest. Then, in order to retire early, it’s best if you invest in multiple income sources that can float you until you hit the magic age of 59 ½, when you can start withdrawing from your retirement accounts without penalty.

Try out his formula in your own plan with the retirement planning calculator.

Even if you hate your job and have a “countdown to retirement” clock on your desk at work, you’ll still likely have difficulty when you finally give them the old heave-ho.

Jacob, from Early Retirement Extreme, likens it to a long-term marriage. A break-up from your long-time spouse is sure to be difficult. You think the escape will be nothing but sunshine and rainbows, but it’s not always that easy.

The same is true of your job. Expect it.

Better yet, set up a future for yourself in other areas – self-employment, volunteering, or starting that part-time gig we mentioned above. When you’ve already moved on to the next thing mentally, letting go of the old boat anchor becomes that much easier to do.

As with almost anything, you dive into something expecting to find the hidden secret or the magical takeaway and the results are quite obvious and underwhelming.

This analysis was no different.

If you want to retire well and retire early, you should simply live modestly, get rid of all your debts, earn a solid income, forecast what you need (but be flexible) and invest heavily. That’s really all there is to it. Dig any deeper and you’re just wasting your time.

The most valuable information here were the items that hardly anyone talks about:

  • Being willing to work after retirement
  • Having an understanding that even the best-laid plans are futile – you’re never going to predict exactly what will happen over a 30-year span. It’s impossible.
  • Retirement is not all unicorns and angelic choirs. It’s just the next challenge in life worth conquering.

Go in with the right mindset, understand what happiness truly means for you, and never stop working toward the goals that will take you there.

We hope the NewRetirement retirement planning calculator can help you.

Source: newretirement.com

Money Audit: Can I Retire Early?

Mint devotees James, 51, and wife, Carol, 43, hope to mark 2018 as the year they achieve what many only dream of accomplishing: retiring early from the daily grind.

He’s a technical manager and she’s a self-employed real estate agent residing in Birmingham, Alabama. Their net worth totals $1.66 million (not including their mortgage-free home).

“Is financial independence within our reach?” James asked via email.

At first glance, I thought, “absolutely.”

But most of their money is tied up in retirement savings vehicles like a 401(k), SEP IRA and a pension, which require that you reach “retirement age” to make withdrawals without penalty, usually 59 ½ years-old.

Assuming the recommended distribution of about 4% from their investments each year in retirement starting at age 60, their nest egg can more than cover their cost of living once they become eligible to withdraw from those accounts. Plus, James says his social security payments will be roughly $3,000 per month once he can begin collecting.

But can the couple feasibly retire now?

Ahead of some suggestions for James and Carol, here’s a bigger snapshot of their finances:

Household Income: $160,000 per year

Savings/Investments: $1.66 million

  • $1.2 million in a Roth IRA, SEP-IRA and 401(k)
  • $192,000 expected lump-sum distribution from pension
  • $221,000 in a brokerage account
  • $50,000 in cash

Debt: Zero. Everything’s been paid off.

Monthly Spend: About $3,000 not including vacations and payroll taxes.

  • Groceries $350
  • Cell Phones $135
  • Car/homeowner/umbrella liability insurance $177 combined,
  • Health insurance $400• Life insurance $25
  • Gasoline and car maintenance $230• Power $160
  • Property tax $150• Leisure $150• Dining out $200
  • Utilities $65
  • Medical $100
  • Gifts $200
  • Clothing $125
  • Non-grocery $125
  • Home maintenance $150
  • Auto registration $25
  • Other $250
  • Vacations and travel $1,700
  • Payroll Taxes $2,600

Okay, here are my thoughts.

Let’s Run Some Numbers

How much money would the couple realistically need each year to maintain their current lifestyle (which I don’t think is lavish)? And where would they source that money?

Let’s guesstimate.

Their current expenses – minus the cost of payroll taxes from Carol’s real estate company, which would, presumably, be much lower once she winds down the business in retirement – are roughly $4,700 per month.

No longer receiving health benefits through James’ employer, the family would need to secure their own medical insurance until qualifying for Medicare at age 65. Until then, they could easily see their medical expenses jump by a factor of two – maybe more.

That means that they’d need about $6,000 per month to keep status quo…at least until their 13-year-old daughter is headed to college, at which point their expenses may creep higher. However, James said they’re working on a plan to mitigate those costs by encouraging their daughter to earn high school Advanced Placement credits, which can be applied toward college credits. The family estimates providing $10,000 per year for their daughter’s schooling, while she’d cover the rest. (And by the way, they may be able to tap their Roth IRA for college expenses when the time arrives.)

Their current cash savings and brokerage account investments total $271,000. After taxes, I figure money could stretch about three and a half years. James still wouldn’t be eligible to withdraw from his 401(k) at that point.

Don’t Quit (Yet).

Instead, take the year to transition.

As stated, with so much of their savings tied up in a 401(k) and various IRAs, it will be eight years before James – and 16 years before Carol – can qualify for penalty-free withdrawals from their retirement portfolios. The remaining money in their traditional savings and brokerage accounts ($172,000) is only enough to cover them for a limited number of years given their current expenses and the fact that they’ll need to pay more for medical insurance.

For these reasons, now may not be the best time to quit their careers cold turkey.

James even admitted to not wanting to leave the workforce entirely.

Instead, the couple wants to channel their skills into new lines of work that offer more time and flexibility. With his technical skills, James envisions bringing in some income through consulting work. As a real estate agent, Carol looks forward to staying active in the market, but working on fewer deals.

I suggest they utilize the first half of this year to better map out – and even experiment with – their work/life framework in early retirement.

Can James plant some seeds this year for securing consulting work and land a client or two? Can Carol wind down, say, 20 to 30% of her business and start working on projects she’d like to pursue in retirement?

Meantime, could they stow away another $70,000 in the bank? With about $120,000 in cash– the equivalent of two years of living expenses –the family then has a long, liquid runway to fully build out this next chapter in life and establish new revenue streams to support their expenses. Eventually earning a combined $60,000 a year in part-time work would be a healthy target so that they could extend the need to tap their retirement portfolios – to perhaps even beyond age 59 ½.

And speaking of retirement portfolios…

Keep investing, but be mindful of stock exposure.

Just because they’re retiring, doesn’t mean their investments should get out of the game, too. It will be many years before James will want to withdraw from his 401(k) and Carol from her SEP-IRA. [By the way, for James, once he quits his job, he may want to transfer his 401(k) to a Traditional IRA to be able to continue making some annual contributions.] If the market takes a dip or a dive, they should have enough time to recover.

That said, too much exposure to stocks at this stage in life, and particularly because of their soon-to-be reduction in earnings, means they don’t want to be overexposed to the stock market.

A very general rule of thumb is to subtract your age from 100 and make that your stock percentage in your portfolio allocation. So, Carol, who is 43 years old, would want to be about 57% invested in stocks and the rest in bonds and cash. James would want to be around 49% invested in stocks. If they believe their risk tolerance is below average, then they may want to consider investing even less in stocks.

In summary, early retirement (aka living life on their terms sooner than later) is not unfeasible for James and Carol. Calling it quits tomorrow? Not so much. But if James takes the year to build inroads in the world of consulting and Carol to unwind some of her clientele while exploring other passions and pursuits (and all the while both continuing to save), I think that in a few years they could be fully immersed in their definition of early retirement!

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

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Source: mint.intuit.com