How to stay on track for early retirement with a pay cut

The pandemic has indeed put a halt to our lifestyle. We can’t make any travel plans, go out freely, or even plan get-togethers outside. We don’t even know when everything will become our previous normal again. However, that doesn’t mean that we’ll have to stop planning entirely. We can very well pursue our financial goals like working for early retirement.

As per a recent report, about 60% of people in our country have said that the coronavirus pandemic has hurt their retirement savings significantly. About 14% of people have also withdrawn amounts from their retirement fund to meet their daily necessities.

I know it is not that easy to stay on track for early retirement since many of you have faced pay cuts. However, it is not impossible, either. If you can continue with achieving FIRE, you can live your life on your terms; that is, after you achieve FIRE, you can work not just to earn your livelihood but for your enjoyment. Yes, you might have to delay your early retirement by a few years depending on your financial situation.

Let us discuss how to stay on track for early retirement and achieve FIRE (Financial Independence Retire Early) even during a pandemic situation.

Modify your budget

When you are already into the FIRE movement and planning your early retirement, it can be assumed that you won’t have to worry about meeting your necessities, at least a few months, even if you’re going through pay cuts. You surely have planned your financial situation such that you can tackle your rainy days with ease.

However, you might have to modify your budget to reduce your expenses because it is not advisable to liquidate your investments at this time. You might have to modify your financial planning, too.

Why don’t you follow a minimalist lifestyle and plan a frugal budget so that you can save as much as you can, at least for a few months? You can resort to your previous budget once things start getting normal and you start getting your usual income or maybe earning more.

Reduce expenses as much as you can

How will you reduce expenses if you don’t have the habit of overspending? Well, analyze your expenses; you may still find out some saving opportunities.

Focus on your wants less and order less stuff online, which you may not need now. Do not get enticed by the “sale” tags on the items. Even if the restaurants are open in your locality, restrict your eating outs. It has a great advantage. You can have more nutritious food when you prepare it at home. However, do not compromise on eating healthy to save more.

Driving has already been reduced. Even then, plan your trips to grocery stores carefully. Make a list and do the entire shopping once a week. It has a double advantage nowadays; it is better as you can stay at home more during the pandemic and it helps to reduce fuel cost too.

Check your investments

Some experts believe that FIRE followers can take advantage of the situation when the market is low. If your financial situation permits you, use this opportunity to buy investments.

Also, do not check your investment portfolio every day. It is better to leave it as it is until the market condition improves. You will be more stressed if you check continuously.

If you have extra money and can stay current on a home loan, this is a good time to buy a house since the mortgage rates are comparatively low. Later, you can sell the property and earn a good profit.

Looking for extra income opportunities

I have been hearing this thing quite a lot nowadays – to diversify income streams. Don’t bank into your usual job, especially if you’ve faced a pay cut or not getting a bonus.

One of the best ways to earn extra is to look for online earning opportunities. Don’t just reject opportunities because you’re getting paid less, for example, $5 for one survey. Think once! It might be an opportunity to earn $150 in a month – not bad, right?

To stay on track for early retirement, grab these earning opportunities. It will surely help you to achieve FIRE even with a pay cut.

Don’t neglect your emergency fund

While working towards achieving early retirement, do not neglect your emergency fund. I don’t think I will have to explain the importance of an emergency fund to a person who’s already decided to achieve FIRE.

But how much do you have in your emergency fund? Experts say to save about 5-6 months of your living expenses. By doing so, you can rest assured that it will take care of your rainy days, not only during this pandemic but also in the future.

However, during this pandemic time, if you can manage without using your emergency fund, it’s a great thing. It will be easier for you to stay on track for early retirement. If you use the funds, replenish it as soon as things get normal.

Stay away from debts and repay existing ones

Yes, at least for the time being, stay away from debts. A FIRE follower usually knows not to charge credit cards for an amount that is not possible to repay in a month. However, if you may have incurred debts due to pay cuts during this pandemic situation, repay them asap.

Check whether debt consolidation or settlement is suitable for you, depending on your financial situation. If you can repay debts in full, then choosing consolidation is a better option since it’ll have a positive effect on your credit score, too. In turn, it will help you obtain a loan at suitable terms and conditions in the future. Therefore, it’s helpful for your finances since you will have to pay less interest on your loan throughout the loan term.

Before concluding, I would like to mention that focus on your physical and mental health along with protecting your financial health. It is the need of the time to stay healthy and have a sound mind. It will help you stay on track for early retirement and enjoy life once this pandemic is over.

Stay safe and be positive about achieving early retirement!