By CARLOS GONZALES Say you’re in or fresh out of college, and you’re thinking you want to retire by the time you hit 40, what do you need to do to achieve this, if you can achieve this at all? Say you’re 20 and you want to have a retirement fund of P10 million by age 40. That should give you a mo

Say you’re in or fresh out of college, and you’re thinking you want to retire by the time you hit 40, what do you need to do to achieve this, if you can achieve this at all? Say you’re 20 and you want to have a retirement fund of P10 million by age 40. That should give you a monthly income of P100,000 at 12% per year. Of course, P100,000 a month 20 years from now may not be enough. But just for this exercise, let’s assume 6% average inflation for 20 years, you need to set aside just P120,000 a year earning 12% to build your P10 million kitty. Saving P10,000 a month is not an unreasonable challenge, even for a 20 year old, is it? Doubling that means you’ll end up with P20 million by age 40. But how can you do that?

Forget "finding yourself." Focus on getting a high-paying job from the onset. Work for an in-house call center of a multinational company, for instance, which pays entry-level positions at least P20,000 a month. You can move up quickly and earn more. Registered Financial Planner Alvin Tabañag says that you should always be on top of your game by learning new skills. "One can consider jumping from one company to another every few years, negotiating an ever increasing compensation with each switch. I have a friend who more than tripled his salary in three years using this technique," he advises. You can also work in sales, where skies are the limit. Moonlight if you have to.

It’s not embarrassing for 20- or even 30-something Filipinos to live at their parents’ home while they’re single (okay, maybe a little). Just think about the rent, food, utilities, laundry, and communication expenses you can save. Maybe you can even use dad’s car for free and just pay for gas. If you have to move out, rent a studio condo unit or share an apartment with friends.

And keep to a budget. You don’t have to sacrifice your social life, but try to find cheaper ways to hang out and be entertained. Alvin says you should avoid as much as possible spending for fancy stuff, whether it’s designer wear or gourmet coffee. He adds, "Always be on the lookout for freebies. Be an occasional freeloader. If someone else can pay for your food and drinks, why pay it yourself?"

Alvin advises that potential early retirees cannot be weak of constitution and cannot afford to be "sissy" investors. "Learn to take bigger risks," he says. That means, he adds, that you should put most of your savings in equity funds or invest directly in the stock market. If you can sock away P10,000 to P20,000 a month and put your savings into equity funds, which can average more than 20% a year as one leading fund has, you can quickly accumulate wealth in no time. Alternatively, he explains, "If one believes he has what it takes to run a successful business then that’s where he should invest his money. The key is to let their hard-earned money work overtime!"

These days, it’s normal to get married in your 30s, so join the trend. Some even start having babies in their 40s. Face it: marriage and children are costly (or priceless, as the counter-argument goes). So enjoy singlehood as long as you can.

Alvin says, "Follow a simple lifestyle." If you have simple needs, then live a simple retirement. But that defeats the purpose of retiring at 40. If you’d rather be globe-trotting, then you do have to sacrifice your living standards on a day to day basis. Perhaps move to a city or province that has a lower cost of living. You definitely have to cut back on everyday amenities so you can spend on vacations and other leisure activities.

Now, if you fall short of your P10 million or P20 million, or you find retirement to be boring and you can’t wait to get back to work, at least you already have a huge head start.

This article is from is MoneySense, the country's first and only personal finance magazine. You can read more financial tips and stories at www.moneysense.com.ph.

6. Consider the simple life.

5. Postpone having a family.

4. Save and invest aggressively.

3. Control your spending. Don’t use credit cards.

2. Stay with your parents.

1. Make a lot of money.

By CARLOS GONZALES