Some people might think that those who successfully retired young and rich are either lucky or are exceptions in society, but while some are indeed lucky, others simply made an effort to slowly build their nest egg to make early retirement possible.

There is no magic formula to retiring younger, and there are many ways to gain wealth over time, but there are only a few simple steps to ensure that the two come together.

The steps are simple but following them, not so.

Step 1: Define your wealth!

The first thing a person must do before getting started with wealth creation and early retirement plans is to define what these mean for them—it’s important to try to make a person’s goals as concrete as possible in order to have a better grasp of what they are trying to achieve.

It is also important to make allowances to accommodate unforeseen circumstances, such as adding an extra $10,000 to the emergency fund or retiring at age 45 instead of 40.

Jot down the age range for early retirement and the minimum amount one expects to live by—the same way some experts have come up with $1.6 million as the magic number.

It’s fine to shoot for the stars since defining the terms for your retirement plan is simply a way to prepare for the process.

Step 2: Mission: Probable

Retiring early and wealthy was never impossible to begin with, so there’s really no use convincing oneself to make it possible. What a person needs to do, instead, is to increase the probability of securing that goal.

Since the terms for their early retirement have been defined, start drawing up a plan to make it happen.

Take out a pen and paper or create a new document. At the top of the page, write specific early retirement goals as a title (Example: ‘20-Year Retirement Plan to $1.6 Million’).

List down the minimum goal for the retirement nest egg, current income and how much is in their super, investments and savings (if any), followed by the cost of recurring expenses (i.e., rent, utilities, credit, loans, etc.). This should give a realistic view of their financial situation and help make a manageable plan.

Write how much of their income will be committed to achieving the retirement goal—this can be an actual dollar amount or a percentage of wages, say 5 or 10 per cent.

Next are the three most crucial rules:

Rule #1: Actually set aside that committed amount and don’t spend a cent, unless it is to be used as a capital or top up for investments.

For beginners, it’s best to set aside the first $1,000 while shopping for the most effective investments. Once the first $1,000 secured in an investment, consider investing in a different one as a means of diversification. It may be cliché, but financial experts are right when they say “don’t put all your eggs in one basket.”

A diversified portfolio is the best way to insure money from market volatility, interest rate fluctuations and inflation.

Rule #2: Be consistent in topping up investments to take advantage of compounded interest and review the portfolio regularly to ensure that investments and objectives are aligned.

Rule #3: Do not, under any circumstance, take out money from retirement investments unless it is to transfer them to a more effective investment or every other possible option to finance a great need has been exhausted.

Step 3: Develop the proper mindset

In order to develop the proper mindset, it is important to visualise how retirement would look like. For instance: Which is more preferable between renting a place of residence and owning a home?

Many of the young and wealthy retirees whose wealth did not come from rich parents have relatively simple lifestyles that shy away from unnecessary expenses. However, that doesn’t mean they refuse to spend their money.

On the contrary, they have properly balanced lifestyles which give them satisfaction whether they spend small on necessities or enjoy some luxuries.

Hint: most, if not all, young and wealthy retirees own their home and are virtually debt-free.

So what makes these young retirees different enough to generate wealth and afford early retirement? Simple: they focused their spending on what’s necessary, lived within or below their means and their lifestyles support their financial goals.

They’re also on top of their investments in the sense that they make sure that they’re the ones earning from their invested money, not the financial advisers with steep fees. They’re not necessarily active investors, they are simply consistent.

However, it is not necessary to mimic everything young and wealthy retirees do with their lives and money. Always remember that each person is affected by different circumstances, which is why each person must develop a mindset that is unique to their specific situation.

Step 4: Don’t be impatient and/or greedy

Retiring young and wealthy requires time and patience to allow finances to grow. Wealth building isn’t magic— it’s a process that takes time.

When it comes to money, always keep a rational mind above emotions.

It may seem like there’s too little time if early retirement is the goal. But as long as there are good investments in place, there’s no reason to gamble money on get-rich-quick schemes.

Warren Buffett said: “be fearful when others are greedy and greedy when others are fearful”. However, this advice should still be applied on a case-by-case basis.

Step 5: Grow your nest egg by starting now!

Open up a savings account and begin raising capital with money in the sock drawer, allowance, birthday money or wage.

Everyone starts somewhere, and, unless a parent gives their kids a hand to help them get started, a person should be content with starting small on their own. The important thing is that they don’t forget to top it up regularly so that initial savings will grow.

It doesn’t matter how small the initial investment is, just do it—and do it now.

Bonus for the youth: Be part your own investment

One of the best investments to help grow finances is through personal development.

Choosing a practical degree or pursuing your passion is up to the individual. Success depends on how they are able to learn and equip themselves with the necessary knowledge and skills to further their career growth and financial security.

A person may potentially increase their value and income faster by improving their skill set.

Step 6: Don’t stop

Building wealth to use decades from now is not for the faint of heart. It takes courage and great resolve to remain consistent with a plan without immediate rewards.

Just think of how nice it would be to already be relaxing in retirement at a time when one’s peers are still scrambling to plan theirs. If there’s logical a plan, follow it and don’t stop.

This information has been sourced from Nest Egg.