Here’s How One Couple Is Achieving Financial Independence Before Age 50

One thing I love about working at Financial Finesse is that I have the opportunity to provide financial guidance to folks with a wide range of needs. The majority of my conversations are centered around the specific needs of an individual at a specific point in time — it gives my days a huge variety and I find that every conversation I have is unique.

However, I was recently reminded that while each person and their needs and goals are unique, many of us are in the same situation. It’s how we approach that situation is what leads to differing needs, goals and outcomes. Here’s what I mean.

The situation

I recently spoke with Craig (not his real name), who was looking at ways for he and his wife to maximize retirement plan contributions. Their goal was to save 50% of their income and to be financially independent in the next 5 to 10 years. He is 37 years old now. After assessing his situation, I agreed that they would actually be able to achieve that goal and be completely financially independent before the age of 50. Amazing!

As our conversation concluded, I found myself thinking about how this guy and his wife are doing things right but was also telling myself that their situation is unique and that they are lucky — they both have good paying jobs and could afford to sock away a good chunk of change to meet their goals.

But as I gave it more thought, I realized that their situation was not at all unique. Like may of us, they both went to school, got jobs that paid them fairly, eat 3 meals a day, live in a home and community they enjoy, etc. They weren’t born into money, they were working to accumulate their own savings. What is unique about this couple are their financial goals which translate to different than the “norm” habits and outcomes. So, what can we all learn from their success?

Learning from their success

Decide What Is Important To You. It’s all about prioritization. Craig’s top priority is to save early and often to achieve financial independence at an early age. My guess is, he’s not concerned about keeping up with the Jones’s, nor does he drive a luxury car.

I think you will agree that Craig has probably taken this decision to a bit of an extreme (not everyone can achieve financial independence by their mid 40’s), but we can all set realistic long term goals and adjust our spending and lifestyle behaviors to achieve these goals.

Making a small shift: Set a goal to retire one year earlier than originally planned. Then, cut out something that’s not as important to you as retiring earlier and apply the savings towards retirement.

Plan Early And Often. Rome was not built in a day. When I talked with Craig, it was clear he had been working consistently towards meeting his goal for a long time. My bet is that virtually every financial decision he’s made since his early 20’s has been influenced by his long-term goal. Again, he may be taking this to an extreme, but if you have a long-term vision, set the goal and work to achieve it, you may surprise yourself on what you can accomplish.

Making a small shiftAnswer this question: what do you want to be different in your life 10 years from now? What small action can you take today to take a step toward that change?

Live Below Your Means. Craig and his wife most certainly live in a smaller home than they could afford to buy based on their income. If the bank says you can afford a $350,000 mortgage, that does not necessarily mean it would be a good financial decision for you. Consider what that larger mortgage payment would do to your day to day life style.

Look at it this way, if you had chosen a lower-priced home and reduced your 30-year mortgage payment by $100 per month, and instead directed that $100 to your 401(k) over the 30 years of your mortgage, you would have increased your retirement savings by $100,000 (assuming an annual return on 6%).  That’s real money that could allow you to achieve your financial independence sooner that you think!

Making a small shift: Maybe you can’t move to a home that’s $100 less per month or maybe you don’t have 30 years to save, but what other areas can you cut back so that you can find an extra $100? Use this calculator to see the impact of finding just an extra $3 per day to put away.

The key takeaway from Craig’s story is that if achieving financial independence is THE most important thing to you, it’s entirely possible. You just have to be willing to make some tough choices in order to get there.

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