Take a look around at those who retire early. What did they do so differently that allowed them to hang up their hat and take the rest of their life off?

• Was it a high income?
• A lucky day at the dog tracks?
• Maybe it was that they simply had a plan…

Typically people put in 40+ years of hard work before they are in the position to retire. Even then, many people are going back to work to bring back that income stream. Then there are those who are able to “figure it out” early and make it a mission to live a life of freedom.

How is this done?

1. Avoid and Eliminate Debt
2. Create a Savings Plan That Takes Advantage of Compounding
3. Turbo Charge Income

As long as you carry debt that exceeds income, it is impossible to get ahead. The money you owe will always be more than the money you make. This is a basic concept, but one that plagues many individuals and families. In addition to taking advantage of tax efficient investments, such as your employer’s 401k plan, the primary financial goal should be to become debt free.

Some debt is okay to carry, such as a mortgage and student loans, but even these need to be in line with your income.

Once debt is eliminated, your money needs to be reinvested in order to grow. This doesn’t necessarily mean investing in stocks – though it may be hard to believe that historically this is a good bet.

Look at the creative ways you can invest your money. Here are a few:

• Become a Private Lender and Charge Interest
• Purchase Valuable Art and Collectibles from Auctions
• Invest in Yourself with an Advanced Degree or Specialized Training
• Purchase Private Label Rights to Products and Sell Them

In other words, purchase assets with your money. Whether your asset is yourself, a tangible item, or something that you can be used as leverage to make money. My 12 year old neighbor wants a Nintendo Wii, so he saved up to buy his own shovel and snow scrapper and is offering a snow removal service to raise the money he needs. Ingenious!

The third piece is critical. If you want to retire early, it is entirely possible to live a frugal lifestyle, avoid debt, invest wisely, and make it happen. However, you will always live a frugal lifestyle, which there is nothing wrong with.

There are a few stories on MSN Money of people that did exactly that. One family “Saved $35 a month by hanging the laundry instead of using the dryer,” When you find dozens of ways to cut corners like this, you can increase your cash flow by dramatically reducing your cost of living.

The alternative, which is better in my personal opinion, is to retire young and rich without having to worry about money at all. My definition of financial freedom is not to have enough money that allows you to cover your bills. Financial freedom is an income streams that allow you to not have to worry about money whatsoever.

This is accomplished by producing additional income streams to boost those investment contributions.

You can only budget down your life so much, but there is an unlimited amount of money you can create – and an unlimited number of ways to create it. Once you have more money coming in, that’s extra money that can be used to purchase more assets.

Think about this… If you invest $500 every month in your 401k and over the long term you receive a 10% annual return, you’ll become a millionaire in about 29 years. Let’s say you find a way to bring in an extra $500 a month and apply that to your investments. Now you’re investing $1,000 every month and it will only take you 22 years to become a millionaire.

Just an extra $500 a month and you’ll become a millionaire 7 years sooner. But don’t think so small. What if  you could increase your income an extra $2,000 a month? How fast would your reach your first million then?

Here’s the secret. Once you learn figure out how to make $1, you can scale it up to make $100. When you figure that out, you’ll realize how easy it could be to make $500. From there, $2,000 becomes $20,000 a month, and so on. Opportunities come to you.

In conclusion, there are lots of ways to retire young, but if you stick to the fundamentals and put a plan into action, you’ll get there faster than you think.