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Ready to Retire Early?
As a woman striving for early financial freedom, I have had many people question the possibility of achieving the huge goal of retiring before 30.
Thing is, achieving early financial freedom is possible if you are comfortable with going against the norms. In this article I will go over 9 different ways to adjust your lifestyle in order to achieve early financial freedom!
In short, to achieve financial freedom, a person must significantly reduce their fixed expenses, stay out of debt, invest heavily and early, and consider house hacking. This will give a person enough time and money to create passive income to replace their W2 job before 30.
To learn about each stage of financial freedom, be sure to go through this article to discover what stage you are in now, and how many stages you have left to achieve!
What is Financial Freedom?
Achieving financial freedom has become an exciting topic amongst personal finance circles in recent years.
Although this concept has been around for a long time, achieving financial freedom, especially achieving financial independence before 30, is more possible than ever!
It is critical to realize, though, that trying to achieve financial freedom requires you to go outside the norm, outside the status quo, and to sacrifice a bit. It takes time, the skill of delayed gratification, and a lot of determination to achieve.
Financial freedom, also known as financial independence, is the status of having enough regular income to pay for your living expenses every month for the rest of your life without needing to be employed.
Achieving financial freedom is a goal of many young adults nowadays. The idea of not having to go to work is very appealing, especially when you see so many people getting rich quick online!
Aside from the points I’ll discuss later in this article, here are a few of the many ways to achieve financial freedom by your 30’s:
- Increasing cash flow
- Having a strict budget
- Reducing expenses
- Eliminating debt
- Growing passive income
- Saving money
- Establishing goals
With this said, let’s go into the nine important steps to change your lifestyle in order to achieve financial independence by 30!
1. Reduce Your Fixed Expenses
The concept of reducing your fixed expenses is an important key of the groundbreaking book, Set for Life by Scott Trench.
To better understand this first tip, you have to understand the difference between fixed expenses and variable expenses.
Fixed expenses are expenses that don’t change month by month. This can include housing costs and student debt payments, for example.
Variable expenses are costs that vary month by month. This can include food, entertainment, or even personal care.
Now, consider this concept: You could choose to stop going to Starbucks, going out to bars, and stop going out with friends, or make one simple change.
First, let’s discuss your living expenses!
As a young adult, your largest monthly expense is likely your living expenses.
Housing costs vary depending on where you live! If you are working diligently to save every dollar you can, yet you live in one of the higher-class suburbs or in a popular area of the city, imagine how it would feel to save an extra few hundred dollars a month from simply changing where you live.
If changing where you live is too difficult to implement in your life, then consider house hacking! This is a rental investing opportunity that is available to anyone and is easy to do!
Next, let’s talk about your food expenses!
Food is typically the second largest expense in a monthly budget.
Here are 4 budget hacks to decrease your food expenses:
- Meal prep your breakfast
- Learn how to make your own signature coffee drinks
- Choose only one night to go out to eat and make it a reward, not a regular event
- Double all of your recipes and package the extras for lunches and dinners
Lastly, travel costs to/from work are typically a large fixed expense that can be changed to save you hundreds each month!
Here are a few hacks to save money on your travel costs:
- Move closer to work
- Bike or use alternate options to travel to work, aside from a car
- Car pool with a coworker, family member, or friend
- Consider public transportation options
How would having an extra hour a day impact your life? If you get paid and work per hour, you potentially can get paid an extra hour in a day.
The time cost that you can gain back, compounded over a year or more, can add up to be more than you would imagine. However, the problem with this is that your travel and living expenses are not easily fixed overnight.
When you combine the concept of changing your living expenses and your travel expenses, you can potentially save multiple hundreds of dollars each month!
If you want to retire early, you could work really hard on a side hustle or work extra overtime over the period of a few years.
Or just change where you are living and your food expenses!
If you are really excited about retiring before 30, you need ideas that will easily help you get a few hundreds of dollars more a month. Changing your fixed expenses will help give you the extra cash you need to invest and build more passive income!
2. Stay Out of Debt
Trying to accumulate passive income while having a mountain of debt is a backwards battle.
Understandably, many people have 10s of thousands of dollars in student loans or credit card loans to their name. It can be exciting to try to start investing and growing passive income all the while ignoring your thousands in debt.
It has been proven many times by countless financial educators that paying off debt should be one of the first steps that a person takes before trying to invest in accumulate additional wealth.
Imagine how much easier it would be to invest and grow your wealth if you did not have to pay hundreds a month in student loan interest or in credit card debt.
Get out of debt as fast as you can, and then get aggressive with achieving your early retirement goals!
3. Harness the Power of Rental Investing
As mentioned above, when considering your monthly budget, your largest expense is typically your housing costs.
In order to reduce your living expenses and to grow monthly cash flow to earn passive income, house hacking offers a unique opportunity to significantly get you closer to your goals!
However, it is important to first learn the 8 types of house hacking, because each is a unique way to reduce your living expenses.
These are the eight types of house hacking:
- Buy and Live in a Multifamily Property
- Rent Out a Room
- Rent Out the Home (while living in one room)
- Mother-in-Law Suites
- Additional Dwelling Units (ADU’s)
- Mobile home and RV’s
- Live-in Flipping
- Airbnb
So, why should you consider house hacking if you want to retire early?
- House hacking reduces your living costs
This was mentioned before, but the key reason house hacking has become so popular amongst young adults is because it reduces your largest monthly expense! Each house hacking method is for the purpose of getting extra money to pay less for your housing.
- Build equity using other people’s money
One of the great pros of house hacking as a young adult is that you can build equity, yet not have to use your own money! Getting into real estate when you’re young can quickly build your portfolio and help you gain large amounts of assets by the age of 30.
For more information on retiring early with rental investing, check out my free course of real estate investing here!
4. Stop “Living Like the Joneses”
Another way to achieve early financial freedom is to stop trying to compete with others with materialistic items.
This can include everything from buying a nice house as a young adult, owning a new car, having name brand clothes, and spending on frequent outings and entertainment.
The phrase “living like the Joneses” essentially means “trying to look cool like the rich people down the block”. It’s all about competition and making yourself look richer than you actually are!
Unfortunately, many people get caught up in this and end up spending far more money than they should in order to look wealthier. By accepti
Be sure to check out the book, The Millionaire Next Door on Amazon to learn about how “everyday millionaires” live, spend, earn, eat, and shop!
5. Start Growing Passive Income
How do you plan to make your money work for you?
The reason that so many people turn to earning passive income is that you can put the effort in upfront then earn money for many years following!
Passive income is a key pathway to achieve huge financial goals! In fact, 35% of Americans currently have side hustles and are working toward growing passive income!
Here are a few ideas:
- Selling digital products
- Investing in REITs
- House hacking
- Sell digital items on Etsy
- Investing in rental properties
- Affiliate marketing
There are plenty of ways to work smarter to grow money, rather than trying to work harder!
Sounds easy, but creating passive income takes a lot of time and effort. Let’s explore how to make your money work for you!
Here are a few ways to grow money with little effort:
- Put savings into High Yield Savings Accounts
- Invest in your RothIRA and/or 401(k)
- Get rid of your debt
- Have an emergency and sinking fund
- Invest in rental properties
- Invest in the stock market
As you continue to grow your wealth past debt freedom, it is important to consider how you will earn money using smart tools that are available. Research more ways to earn passive income to begin growing your wealth to achieve early financial freedom!
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Americans with side hustles
6. Invest in After-Tax Brokerage Accounts
One of the ways to achieve early financial freedom is through investing and earning dividends!
However, let’s have a quick chat about investing.
Brokerage accounts are platforms where you can purchase and hold securities (investments).
But, what is the difference between investing through Robinhood, for example, versus into your RothIRA? First, you must realize the tax differences between investing in brokerage accounts compared to retirement accounts! Any gains in a RothIRA would be tax-free upon withdraw. However, you’d be taxed approx. 35% on gains from investing in brokerage accounts (like what many people encourage young adults to do to grow passive income through dividends).
In non-Roth accounts, you have to pay hefty taxes, and the amount you’ll owe only totals more as your investments compound. So, why invest in one of these accounts compared to your retirement?
I typically recommend investing through these accounts if you have extra cash, maxed out your retirement investing for the year, and are okay with gambling. Since this article is all about growing wealth for retirement before the age 30, it is possible to grow wealth through this form of investing, if you don’t choose to invest your cash into retirement accounts.
When you feel comfortable with investing, be sure to do your research and speak with a financial professional for guidance, and be sure to get your free stock from Robinhood here and take advantage of your handful of free stocks from Webull, here!
7. Budget and Get Your Family on Board
This tip ties in with some of the others but is critical as a standalone way to achieve financial freedom fast!
having a strict budget teaches you how to get control of your money. Without control of your finances in understanding how much comes in and goes out every month, how are you supposed to know how much you actually need to achieve financial freedom?
Do you know your financial freedom number? Do you know how much passive income you need in order to retire early?
These are important to consider but can only be determined if you first fully understand your income, expenses, savings rate, investments, and spending history.
to do this, I recommend getting a free app that will allocate your income and expenses into budgeting categories so you can visually see your monthly cash flow. I use Personal Capital and have used it for many years. It is a free app that can be accessed on your phone or computer that tracks your finances and budget, and helps you determine how to invest in order to achieve your retirement goals.
By using an app like this , or using hard copies of tracking a budget, you’ll gain better understanding of how much money you actually need to retire early and you will gain better self control to achieve these other bullet points in order to retire early!
Starting and maintaining a budget isn’t easy! Check out the following guides to help you along your new journey!
- 5 Pro Tips for Creating a Lasting Budget
- How to Live on a Budget an Be Happy
- Ultimate Guide to Adding Sinking Funds to Your Budget
Before moving on, let’s talk about a few other ways to work toward establishing a budget!
Budget Meetings
I always advocate for having monthly budgeting meetings with a spouse, partner, or friend. Doing these meetings are transformational! This is because they keep you accountable and reduce the chance that you’ll quit on your financial goals. Simply sit down in your living room, or go to get coffee, and discuss how the previous month went, your spending history, and what to expect to pay for in the coming month.
Sinking Funds
One of the best additions to your budget that you can make is having a sinking fund! A sinking fund is money set aside for expected expenses. This is different than an emergency fund, which is money set aside for emergencies (unexpected expenses). For example, put in a sinking fund to save up for any vacations, birthdays for the year, and even Christmas!
(Pssst: Sign up for my email list down below to get 2 free printables a month, including sinking fund trackers and budget meeting worksheets!)
8. Change Your Mindset
Why do you want to achieve early financial independence?
This is an important question to ask yourself, because if you want to be financially free by 30 just to look cool or to own fancy cars, you may be in this for the wrong reason!
Let’s consider the words “wealthy” and “rich”. For some of you, there may not be a big difference between the two words. However, this is an important distinction to make when considering your future “financially free” self!
As someone who is striving to achieve financial freedom, the act of becoming more frugal and wanting to live a better life can be seen as negative to others! Some may tell you, “You only live once! Why not enjoy it now?”. Or, “I’d rather enjoy my life now than wait until I’m old!”.
Or, some may see your journey to financial independence as an attempt to look rich or have more money than others.
Typically, the rich are people who:
- Overspend to “keep up with the Joneses”, social media, friends, etc.
- Feel influenced to buy more expensive items like homes and cars
- Don’t have enough money coming in to make up for expenses (i.e. Have high debt)
The majority of people who you think are rich, are indeed within this category. Our current American society encourages instant gratification. With social media, this is compounded even more. We want people to like us, and we want it now!
So, if we could only buy that one shirt, or upgrade to a better house, then maybe others will like us more, right? The problem is that we are never satisfied.
“Wealthy” individuals:
- Keep track of all their spending
- Enjoy life without feeling the desire to compete with others
- Build a life without money controlling them and use money to enjoy life
Which of these two options sound better to you? Understandably you may want to afford better things, but it is the mindset that makes all the difference!
Adopting a new mindset around money is key to achieving a high net worth. Understanding your “why”, having solid goals, and having a support groups are all ways to adjust your mindset for wealth, rather than just trying to be rich.
9. Save More, Earn More, and Spend Less
If there is any key takeaway to achieving early financial freedom by 30, it is to save mark, earn more, and spend less.
By working toward spending less money, you are in turn, saving more money. When you earn more money, you can save more money. By saving more money, you can invest more money!
Achieving early financial freedom requires diligent watch over how your money comes in to your life and how you spend it.
Take the time to look at your spending history and consider the budgeting recommendations earlier in this article.
Also, consider this: If you earn a penny, you get taxed on it. So, in reality, you earn less. If you save a penny, you don’t get taxed.
Therefore, if you’re working toward getting more money into order to achieve a huge financial goals, consider if it is better to try to save hundreds a month or work harder to earn hundreds more each month.
All in all, achieving financial independence by 30 requires multiple factors to be set in place. You need to understand and keep track of your money, live frugally, spend less, earn more, and invest or create passive income avenues.
Most millionaires have 7 streams of income! How many do you currently have?
Be sure to go research more ways to earn passive income and to grow wealth. Remember that it is possible for anyone to achieve early financial freedom!
What is keeping you back from this amazing achievement?