As I Turn 40, I Have Saved Enough for My Retirement - How I Did It

Editor's Note: Money254.co.ke welcomes reader's feedback and submissions for anyone who would like to share their story about their personal financial journey. Reach us through editor@money254.co.ke

I set a goal to retire before I was 40 when I was 23 years old. True to my plan, my 40th birthday was also my retirement party. I am beyond fulfilled to live my dream.

Growing up as the last child in a family of seven, I saw my parents struggle to get me through school in their old age. Instinctively I thought there must be a better way to live than raising kids in one's old age.

As I grew up I understood things much better. As a personal goal, I decided I would retire at 40 and spend more time with my family while I am in my prime. 

As I am writing this, I have done it. However, the journey has not been exactly as I envisioned it when I was 23. Here is how I did it in 10 steps.

Step 1: Budgeting and Saving

I was lucky I never tarmacked. The bank where I did my internship absorbed me after six months. My starting salary was Ksh40,000. However, this felt like a million shillings because my expenses were barely Ksh20,000. I was used to the student lifestyle. I also learned how to bootstrap during my internship. 

When I got my first salary, I started implementing the personal finance tips I had learned. The first is budgeting and saving. I saved 50% of my income. I have tried to maintain 50% savings throughout my working life. 

• Note: I am a frugal person. I take advantage of discounts. I check price changes by the shilling. I choose the peace of having enough left to sustain me rather than the need to show off or be extravagant.

The other unspent 50% went into six different areas. 

• Paying debt
• Emergency fund
• Pension plan
• Insurance
• Education fund
• Investing

Step 2: Paying HELB Loan

I understood that getting rid of my debt as fast as possible would leave more in my pocket. The only loan I had at the time was a HELB loan. The loan took me about 4 years to repay. In those four years, I did not add any other loan. 

During this period, paying off debt was the most important goal out of the six. However, I contributed to each of them every month.

Step 3: Emergency Fund

While I was paying off my debt, I was also creating my emergency fund. I learned a rule of thumb which I have kept to date. ‘Save at least 6 months worth of your basic expenses.’ 

As soon as I finished paying my debt, setting up my emergency fund was the next top priority goal which I accomplished in less than a year. My emergency fund has since grown as I got kids, but I have always kept it in a money market fund (MMF) for returns and ease of access when I need the money. 

Step 4: Pension Plan

I was also religiously contributing to my employer's retirement fund. My employer matched what I saved. This motivated me to max out the plan. 

Additionally, I still contribute the minimum mandatory deduction to the National Social Security Fund (NSSF). 

Step 5: Insurance

Once I had my debt paid and an emergency fund set up, the next recurrent costs were insurance, an education fund, and an investment fund. At this time my pay had doubled.

My employer already provided me with health insurance, reminds me I will need to take a new cover as I head to retirement! I also invested in a life Insurance cover - an endowment plan that matures after I hit 40.

On the other hand, I had the usual National Hospital Insurance Fund (NHIF) which I have rarely, if ever used.

Step 6: Education Fund

As I was doing all this, I opened an education account for my kids - long before they were born. You remember I never wanted to struggle to educate my kids when I was older. I now have two, a boy and a girl - and I have enough to ensure they get to a university of their choice without struggling. 

Step 7: Investing

I am not much of a risk-taker. Therefore when it came to investing I did not complicate things. In the beginning, I never started a business or bought parcels of land. I bought land later on in life. Early on, I only invested in government securities like bonds, and T-bills. I also put some savings in my Sacco at work. 

The market has had its ups and downs since I started investing but the gains from those investments have enabled me to retire early.

In the last five years, I have been making adjustments in my portfolio from just having financial assets. I have always had a dream of retiring to a farm and in preparation, I have been doing part-time goat farming in Namanga for the last five years. 

As I retire, I have my 5-acre farm operational and profitable.

Step 8: Lived a Frugal Lifestyle

While many people would want to retire at 40, many people cannot live as I did. Since my early 20s, as everybody was partying, dressing fancy, eating out, going on dates, and buying cars - I never indulged.

Partly because of my personality. I am introverted. I enjoy my company tremendously. All I need is a movie or a book to have a fabulous weekend. If I need to interact with people, I refuel my social batteries when I go to church.

I delayed getting married for a while. As my peers were getting married in their mid-20s I got married at 30 years. By the time I was getting married, I had set up a stable financial system. I was lucky to find someone who was happy living a frugal life.

After close to ten years, I moved out of my bedsitter to a two-bedroom house when I started dating, but by then my income had quadrupled from where I started.

I bought my first car, a Toyota Vitz, at 33 when we got our firstborn.

Step 9: Starting Early and Stashing

Starting early gave me a huge advantage. Over time, compound interest has played in my favour.

In addition, if I received any bonuses from work or windfalls, I put it all into investments. 

Step 10: My Happy Retirement

The last 17 years of my life have been intense. I dedicated a lot of my time to work. This helped me climb the corporate ladder quite quickly but I didn’t want to live like that for the rest of my life.

For me, the perfect day is the day I sleep without an alarm, wake up without rushing, have breakfast then go out to check on my livestock or plants. In the afternoon I can binge on a book while watching the sunset.

I can now live my dream, I do not need to keep running in the hamster wheel.

I have enough investments and a profitable goat farm. 

Wrapping Up

While I am thrilled I was able to hit my target and retire by 40, it has not been easy. There have been a lot of sacrifices along the way, but now, they all seem worth it. With the way things are, I can retire comfortably and I couldn't ask for a better life.