Welcome, and thank you for reading this guest post! If you are already looking through myjourneytoinfluence’s blog then CONGRATS! You have started your financial journey and are looking to your future for a more fulfilled and stress free life! Everyone has a different history, story, and journey. People read, watch and listen to a variety of information every day. Some things stick and stay with you and other information goes in one ear and out the other. Today, I want to share with you about a concept that stuck and stayed with myself and my husband since January 2016.
Seriously, this idea has CHANGED our lives!
My husband, who was my boyfriend at the time, came to me with this idea of FI/RE – Financial Independence Retire Early. This is the idea that your passive income outweighs your spending. Simply, you have SO much money invested that through compounding interest and market gains, you are able to live off of the revenue of the interest instead of working 40 hours a week for a paycheck. And I said “okay, great (?)”. In my head I was thinking that this path is only for people making over $200,000 a year, have very wealthy parents or invented something really cool. Plus, we had over $40,000 of debt and not to mention I already had my eyes set on a brand new car and the American Dream home- 4 bedroom, 4 bathroom, double garage, and of course a white fence. But after he explained it to me in further detail, it became apparent that through lifestyle changes and developing habits that correlated with a positive relationship with money that was possible for even us- broke, in debt college students!
FI/RE is really about a mindset. We explain how we go about our FIRE journey through our video Simple Principle to Achieve Financial Independence. We focus on minimalism and intentional principles to increase our saving and decrease the clutter and “stuff” that we used to accumulate.
With all of the being said, I want to share with you our TOP 5 tips to start your own FIRE journey.
- Know where you stand
- Before you start ANY journey, you need to know where you are now. Take a look at your debts and assets and then determine your net worth. Net worth is defined as your assets minus your liabilities. The sole indicator we use to evaluate where we financially stand is net worth. The point of this is to know how much you have and how much you owe to who.
- Attack any and all debt (besides the mortgage)
- Our personal strategy to attack debt is by listing out debts highest to lowest by interest rate. We list the name of the debt, how much we owe, and the interest rate on this loan. We threw as much money as we can at it, starting with the highest interest rate. This strategy works for us, but everyone is different and attacks their debts differently!
- Make retirement a priority
- There are many ways to do this. One first thing you should do is max out your 401(k) contribution. Don’t know how to do this? Email your HR representative at your work. It is THEIR JOB to help you understand and make choices regarding your retirement through your employer. Understand your company’s options and max out your contribution and get your company’s match. Next step is open and consistently contribute to either a Roth IRA or Traditional IRA. Learn about both and determine what is best for your situation. Open it up and contribute. Right now, you can contribute up to $6,000- which translates to $500 a month.
- Self Awareness before, during, and after impulse purchases
- One of the biggest inhibitors to a FIRE journey is IMPULSE SPENDING. We are huge advocates of spending money on things and experiences that enhance your quality of life. This means we don’t spend money on everything we want just for the heck of it. We reflect on our purchases and determine if we are happy with it or if we felt like it was unnecessary. We ask ourselves “was the purchase really worth pushing back our retirement timeline”. This includes gym memberships, vacations (both we DO spend money on), subscription services, home decor items, eating and drinking out etc. This may sound extreme, but it gets the job done.
- Live below your means
- This one is as simple as it sounds. You have to spend less than you make. Managing your money in a way that you build up momentum in saving and investing is the ONLY way to eventually retire, early or not. Look at your income and NECESSARY expenses and ensure your excess purchases do not outweigh that. Even better, have a targeted savings rate. We consistently save 52% of our income. What can you save?
There are our tips on starting your own FIRE journey! This concept was life changing for us and helped us get rid of debt FAST, make investing a priority, and get rid of the extra “stuff” we really didn’t want, care about, or need.
Isn’t that fun? A guest on the blog to share more insight and perspective. I loved learning more about the FIRE movement and this fun couple making it happen!
I returned the favor and did a little guest spot for their blog and posted about my financial journey as well. I included my 10 pieces of advice for the millennials, and included our progress and net worth to date.
Thank you for joining me on my my journey to influence.
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