I've saved enough money that I now consider myself financially free. Here's how I did it, along with some steps that will help you join me sooner, rather than later.
I’ve reached a great place to be: If my job were to disappear, I have enough money to live what I consider an acceptable lifestyle for the rest of my life.
I’ve based this on computations using several online retirement calculators, along with some assumptions about my future. While lacking a crystal ball, I’m confident I could pull it off. That’s pretty good for a 58-year-old single woman, and definitely bucking the trend.
So I’m saying happy financial independence day to myself.
How did I get there? Money Talks News founder Stacy Johnson offers several steps to achieve financial freedom in the video below. Check it out, then read on for details about my own experience.
I have zero debt. I carried a credit card balance for a month once or twice, if memory serves, many years ago. Now I live strictly by the rule that if I can’t afford to pay for something today, I can’t afford it. Credit cards for me are strictly a convenience offering benefits like extended warranties and rewards.
I’ve purchased only one new car in my life and that was many years ago. The rest have been well-researched used models. The next one will be purchased with cash.
The house is paid off – a 30-year mortgage ditched in about 11 years. Extra payments against the principal each month, plus money from a small inheritance, retired that debt. You can’t imagine how good a feeling that was and still is.
Watch your spending
Some people need to track every dime they spend. I generally don’t because I make saving a top priority, and my needs consume far less than I earn. Born without the shopping gene, my wants are few, and when I do buy, I shop for quality, a good price, and with an appreciation of how my purchases will enhance my enjoyment of life.
Some friends say I’m the most frugal person they know, and that’s fine with me. Being frugal comes in handy when you’re faced with an unexpected loss of income. When I’ve been there, it wasn’t a hardship to cut spending on food, ditch paid TV, and turn the thermostat down in the cold months. Oh, yes, and watch every dime. Tracking spending becomes much more important when there’s not much coming in.
To save enough for retirement, you need to invest. But, for the average person, investing is a scary business. I reduce the complexity by investing in low-cost mutual funds. I seek advice from people whose judgment has earned my trust. Now that I’m self-employed, I use a solo 401(k) to contribute a large percentage of my income to retirement funds.
Confession: Although I started saving early, I didn’t start early enough. If it weren’t for the fact that I worked for seven years for a company that at the time had a generous profit-sharing plan, my retirement funds wouldn’t be as healthy as they are now.
Earn as much as possible
I remember the days when journalists used typewriters. Now my work is online-based. That requires embracing new technology.
Maintaining competitiveness in the job marketplace also requires perfecting essential skills no matter what line of work you’re in. Your skills aren’t worth much if no one has any use for them. (I once knew a guy who repaired typewriters for a living when personal computers were becoming popular. I wonder what became of him.)
If the job that employs your skills has gone away or doesn’t pay much, find other ways to generate income. Pick up some part-time jobs or start a simple business with low overhead, like dog walking or pet sitting. Been there, done that. The key is not to touch the retirement funds.
Another confession: I sometimes did a lousy job of negotiating salary. Don’t be afraid to ask for what you’re really worth.
Focus on the future
As a single woman living in a two-income world, I knew I had to make smart long-term choices. I’ve always purchased modest, older but comfortable homes with mortgage payments that weren’t a stretch. In my later years, I purposefully chose to move to an area of the country I love (north-central Montana) where the cost of living is low.
To properly focus on the future, you also have to figure out what you value in life. For instance, travel is very important to me. In order to have enough money for retirement and also enjoy trips here and abroad, I knew I had to live modestly and save.
Visualize your goals
Goals can be large and small, short term or distant. They’re an expression of your personality and your commitment to yourself. Think about what motivates you. If the vision of you ending up as a bag lady provides the will to increase your 401(k) savings, go with it. If you happily envision yourself on a beach in Sicily, that will work too.
So, you may ask, why don’t I retire now? Here’s why:
- I don’t want to. I still enjoy working.
- Working more years will increase what I can collect in Social Security monthly payments. I also plan to further increase that amount by delaying when I collect Social Security until age 70.
- I’d feel more comfortable with an even larger financial cushion. Stuff happens.
But one thing I certainly will not do is set a retirement date without having a thorough session with a fee-only financial adviser — still not a crystal ball, but certainly more astute at finding and filling any gaps in my plan.
Do you see financial independence in your future? What steps are you taking to get there? Please share your comment on our Facebook page.