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How to Become a Millionaire Investing Just $200 per Month

how to become a millionaire

How to Become a Millionaire

In this article I am going to explain how to become a millionaire in 9 simple steps! Read on to find out how!

 

Tip: Save the image above to Pinterest so that you can easily find this article on how to become a millionaire with just $200 a month later!

 

How to Become a Millionaire with Just $200 a Month!

That magical number—$1 million. Even though a million dollars isn’t what it used to be, having a million dollar net worth will still allow you to live a comfortable (and awesome!) retirement.

And, sadly, it is still something most Americans won’t attain. But you can do it; it’s really not hard! It takes a little bit of discipline and dedication, but all it takes is $200 a month! And saving $200 a month is very doable for most families if they make it a priority.

So how does $200 a month become $1 million for retirement? The answer is compound interest. Albert Einstein called compound interest the eighth wonder of the world. When I first learned about the amazing power of compound interest in an extracurricular class I took with my husband while he was in college, I got hooked on personal finance.

I then began a serious study of personal finance, and it’s something I’m still passionate about, more than a decade later. Even if math isn’t your favorite or your best subject, like it wasn’t for me, you can still rock your personal finances. And I’m here to help you do it.

 

Practical Advice for How to Become a Millionaire

In a later section in this article I give very concrete, practical, simple steps you can take to have the money available that you need (as little as $200 a month!) to become a millionaire.

But before I talk about those steps to become a millionaire, though, I want to mention some other habits that are essential for those on the path to becoming millionaires.

 

1. Decide to spend and save intentionally.

In order to become a millionaire, you have to have a little bit of money to invest.

It does not take a ton of money to become a millionaire when you invest regularly over the long term (as you will see below). But you do have to be intentional with your money in order to have some money to invest.

 

2. Start from a solid foundation.

Before you begin investing, you should have some money set aside for the inevitable financial setbacks that happen in life.

The reasons are pretty simple. If you do not have an emergency fund, when something bad happens (and it really is a matter of when, not just if), then you will have to stop investing to take care of the emergency—or worse yet, you might even feel tempted to pull money from your 401(k) or other retirement or investment accounts to take care of the emergency.

And that is something that you definitely do not want to do! So before you begin investing for retirement, start with a solid foundation. And part of that solid foundation is to have an adequate emergency fund.

Before beginning to invest, you really should have an adequate emergency fund. (That simply means that you have money saved in a separate savings account that is designated for emergencies only.)

A great place to park your emergency fund is with CIT Bank, which offers one of the best savings interest rates around. And right now, you can earn up to $300 when you open a Savings Builder account! Learn more or open your CIT Bank Savings Builder account here.

Learn how to build an emergency fund.

Tired of tiny interest rates on your savings?

Are you tired of tiny interest rates? Do you want a solid bank with a long history (one that has been around for over 100 years) who is focused on their customers and not just their bottom line?

Then you should check out CIT Bank. We love our CIT savings account, which offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.75% on your savings account (which is really good in today’s market)! It is a great place to put your emegency fund and other savings.

And right now you can get up to $300 when you open a Savings Builder account! Click here to learn more and open your savings account today!

3. Create a spending plan.

In order to spend and save intentionally, you have to have a spending plan (aka, a budget).

If you want any money available to save and invest, that means that you cannot spend it all on living expenses. And that is where a budget comes in.

Even though a budget might seem restrictive, once you start doing it, you will actually feel like you got a raise! And that is because you will start finding places in your budget where you can reduce your spending.

Having a spending (and saving and investing) plan really is the only way to win with your money and build wealth over time.

You can find the complete beginners guide to budgeting here.

 

4. Begin looking for ways to reduce your spending.

As you begin to budget, you will find places where you can cut your spending. I will talk in much more detail below about 9 areas where you can reduce your spending in order to find the $200 a month you need to invest to become a millionaire, but here are a few quick ideas to start you thinking about it:

  • Think of ways you can cut your grocery spending.
  • Reduce the amount you spend eating out.
  • Spend less on entertainment.
  • Find ways to reduce your transportation costs.
  • Slash your utility bill.
  • Cut your housing expenses.

 

5. Find ways to increase your income.

Finding ways to reduce your spending in order to have money to invest is powerful, but finding ways to increase your income is potentially even more powerful!

And the reason is simple: there is only so much that you can do to cut your spending, but your ability to increase your income is nearly limitless!

For example, you could work to get a promotion or a raise.

You could start an awesome side hustle such as blogging to earn extra money on your own terms. Learn how I make $1,500–$2,000 a month as a newer blogger with these different ways that bloggers make money (and there are many, many other bloggers who make $10,000+ a month working part time or full time from home).

You could get a second job or work overtime.

For even more ideas, check out these awesome ideas for how to make more money

 

6. Start investing as soon as you can.

I will discuss this in greater detail below, as well, but because of the amazing power of compound interest, the sooner you can get your emergency fund in place and begin budgeting and reducing your expenses to have money available to invest, the better.

Why Become a Millionaire?

As I said above, even though a million dollars is definitely not worth what it was 50 years ago, it is definitely enough to provide a comfortable lifestyle in retirement if you spend that money wisely.

And fortunately, because of the many ways that you can make money today, becoming a millionaire has likely never been easier than it is today. For example, there are many side hustles that you can do from home that can give you a great additional income that you could use to invest potentially even more money toward your awesome retirement.

Interested in starting an awesome side hustle that you can do from home to make a great part-time or full-time income doing something that you love and working for yourself on your own schedule? Learn more about how to make money blogging here.

 

Tip: Learn more about how to save for retiremnt here.

By having retirement savings of at least $1 million, you can open up a lot of opportuntunities that you otherwise would not have.

With $1 million or more, you can definitely have financial freedom. You will not have to work into your 70s. You will be able to do some travel and give to worthy causes and pursue other hobbies and pastimes. Depending on the type of lifestyle you want to have and where you choose to live, you may even be able to retire early or semi-retire early if you choose to.

No matter what it is that you are passionate about and what you want to accomplish in life, your path to get there will be easier if you have prepared well financially by setting and working toward those goals. You can learn more about how to reach large financial goals here.

How $200 a Month Becomes $1 Million

It definitely is realistic to become a millionaire by investing just $200 a month! If you graduate from high school or college and begin investing $200 a month by age 25 and work until age 65, and you earn a 10 percent average annual rate of return (very doable over the long-term with good growth stock mutual funds), then you would retire with $1,168,444.

If you are reading this article a little late in the game and you are already 30, you can still easily become a millionaire by retirement! If you saved $200 a month from age 30 to age 67 and earned an 11 percent average annual rate of return, still very doable with good growth stock mutual funds over the long term, you would have $1,126,825!

Don’t want to work till you are 67? No worries! Just up your monthly retirement contribution to $250, assuming you earn an 11 percent average annual rate of return, and you can still retire at at 65 (if you started investing at age 30) with $1,137,492!

And what if you are starting even a little bit later in life than that? You can still become a millionaire with just $200 a month! By saving $200 a month from age 35 to age 69, if you earn a 12 percent average annual rate of return, still realistic over the long term with good growth stock mutual funds, you would have $1,033,592! 

And again, if you don’t want to work till age 69 but want to retire at age 65, then up your monthly retirement contribution to $310, and if you earn an average annual rate of return of 12 percent, then you would have $1,0005,488 at retirement! Or if you like to stick with round numbers, if you contributed $300 a month from age 35 to age 65 and earned an average annual rate of return of 12 percent, you would have $973,053!

So don’t give up on the awesome goal to become a millionaire by retirement! Becoming a millionaire is a great goal to help ensure you reach financial freedom later in life! And if you make those monthly contributions into a Roth 401(k) or Roth IRA, then all of that money will be tax free when you withdraw it too! That means no paying Uncle Sam again in retirement. Woo hoo!

Note: Are you new to investing and want to know how to start saving for retirement? Do you want to know, generally, what kinds of retirement plans to invest in, how much to invest, what types of investments I would recommend for retirement, and more? Then check out this article with 5 simple steps to start investing for retirement.  

Check out these related articles:

How to Invest Your $200 a Month to Become a Millionaire

If you have a company 401(k) or other retirement plan where you receive a match, take advantage of it, and invest at least enough money to receive the full match in your company plan. If you don’t receive a company match, then you will probably be better off investing in a Roth IRA than investing in your company 401(k) because you will generally have many more options in an IRA. (And with many more options you are likely to find mutual funds that offer a track record of better long-term rates of return.)

To help you adequately diversify your retirement account, I recommend spreading your investing equally among four categories: large cap (large company), mid cap (mid-sized company), small cap (small company), and international mutual funds.

We have investment accounts through both Schwab and Vanguard, and they are both good brokerage companies. My Roth IRA is with Schwab, and personally I prefer them over Vanguard. Fidelity is another good option.

 

how to become a millionaire

Ways to Save $200 a Month to Become a Millionaire

In order to find $200 a month in your budget, see if you can reduce your spending or save more money in one or more of the following areas.

1. Cut back on eating out to help you become a millionaire.

The average American family spends about $3,000 a year on eating out. Even though you’ll have to replace some of that cost with the cost of buying groceries to eat at home, the savings here can be amazing. (To learn how to save money on your grocery shopping, read this article with more than 70 tips for slashing your grocery spending.)

For more than 10 years we’ve spent less than $300 a year on eating out for our family, and I know that that has been part of the reason that we’ve been able to reach other financial goals that we’ve set. Read this article to learn how we save money eating out (when we do eat out :)).

2. Slash your grocery budget.

The grocery budget is one of the areas where most people can save a lot of money if they choose to because there are so many options involved and because the difference between what is expensive and what is cheap is so drastic sometimes.

For example, the local discount store where we buy most of our groceries regularly sells frozen boneless skinless chicken breasts for $1 a pound. And yet you can also easily spend $5 to $10 a pound or more on expensive cuts of meat. The same goes for produce in season versus produce that is not in season. People spend a lot of money (a lot of money) on junk food and soda and alcohol and other nonessential items; that’s another area where you can likely trim substantially.

This article shares more than 70 ideas for reducing your grocery spending.

One of the best ways that I have found to save money shopping and grocery shopping in particular is to comparison shop. Grab your free grocery price comparison cheat sheet to help you slash your own grocery budget!

You can also save a ton of money by meal planning effectively! Sign up below to receive the free weekly meal planning sheet to help you save time and money with your grocery shopping and meal planning!

3. Cut your cable or satellite.

There are a lot of free or cheaper alternatives to cable and satellite, so try pulling the plug on these services and banking the savings. The average cost of paid TV in the U.S. is close to $70 a month, so if you will cut your cable or satellite and invest the money each month instead, you will be one-third of the way to saving your $200 a month to become a millionaire right there!

With digital TV through a standard antenna, there are many channels available just on your regular TV—for free. If you haven’t checked them out for a long time, you should. And if you can be a little patient, the library also carries many of the programs and movies you regularly watch, for free. But if neither of those options works for you, you can try Netflix, Hulu, Sling, or other similar options.

4. Save money on other entertainment to help you become a millionaire.

Another area where you can reduce your spending is with entertainment. To save money on entertainment, find things to do with your spouse or family that are free or cheap. There are so many fun activities that you can do for little or no money that reducing spending in this area really isn’t very hard. Check out this huge list of over 90 free activities you can do with your family.

As part of saving money on your entertainment, don’t forget to take a look at the money you spend monthly for your cell phone plan. The average family in the U.S. spends over $1,000 a year (about $90 a month) on their cell phone bill. But you can save a considerable amount if you’re willing to reduce the amount of data you use (or research new data plans with your carrier in case prices have dropped) or switch carriers.

Since September 2018, we’ve been using Xfinity Mobile for our cell phone carrier! If you’re in an area with Xfinity high-speed internet and mobile, you’ve got to check them out! We’re paying an introductory price of $40 per month for our internet (same price as the much slower internet that we used to have from a different provider; it is then set to go to $65 a month, but you can bet we’re going to try to negotiate that down!), and the cell phone plan is virtually free.

Since we’re such light data users (especially given the fact that Xfinity Mobile has free hotspots it seems almost everywhere!), we pay only $3.16 a month for taxes and fees for each smartphone line. (That’s the price if you use less than 100 MB of data per month, which we do; then it’s $12 per GB per month after that, or $45 per month for unlimited.) It’s such an awesome deal!

And Xfinity Mobile has the same coverage as Verizon, which reportedly has the best cell phone coverage in the U.S. You do need to sign up for Xfinity internet in order to use Xfinity Mobile, at least initially. You can then drop the internet service if you want, but then you’ll pay an extra $10 per month per line for the mobile service. Interested in learning more or signing up? Use this referral code to save up to $100 when you sign up: 1RQ4SP

Don’t have Xfinity in your area? Before Xfinity we were with Republic Wireless for over two years. They were a great company, and they are so much cheaper than having service with one of the Big Four cell phone carriers. I spent about $13 a month for my smartphone data plan. Isn’t that amazing? Check out their website to learn about their plans and pricing, and start saving today!

If you use more that 1 or 2 GBs of data, also consider Mint Mobile, which offers plans starting with 2 GB of 4G data and then unlimited LTE data for just $15 per month. That’s an incredible deal. Visit their website to learn more.

Also find ways you can save money on your current cell phone plan with these ideas to slash your cell phone bill here.

Read this article for even more ideas on how you can spend less on entertainment in various areas to help you become a millionaire.

 

 

 

5. Save money on vacation.

To save money when vacationing, try going on a staycation, where you vacation at or near your home. No matter where you live, you can still find tons of fun things to do in your own backyard! Chances are there are tons of things that travelers come to your area to do that you have never done—so check them out!

Read this article to find more than 50 awesome ideas for things to do during a staycation!

You can also save money by staying at people’s homes through Airbnb and by staying in hostels. And by camping.

We’ve been staying at places through Airbnb for the last couple of years, and it’s been great. It’s how we’ve done most of our vacationing during that time—even more than camping. I love using Airbnb because the hosts are wonderful and the price is awesome. And so are the amenities (my favorite places are those with pools and hot tubs :)). Read five awesome ways that you can save money by using Airbnb here.

Sign up now for an Airbnb account and receive $40 to use toward your first stay. Pretty sweet!

 

You can also find many ideas for ways to save money on your family vacations here.

 

Check out these related articles:

6. Get rid of your car payment to really make progress on becoming a millionaire.

The best make and model of car to own is the one that doesn’t have any payments. 🙂 Of course for the longer-term you want something that is reasonably safe and reasonably comfortable and that you don’t have to worry too much about breaking down on you.

But for the shorter-term, if you have car payments on a vehicle and it’s squeezing your budget and you can’t increase your income soon, you should look at selling it. Especially if you won’t likely be able to pay off the car in the next 18 to 24 months at the most, I would strongly encourage you to sell the vehicle.

Even if that means selling the car at a little bit of a loss (when you’re upside down on it) and taking out a small loan for the difference if needed, I would encourage you to do it. And then sell some stuff or work extra or even borrow a little extra money from your credit union or local small bank to be able to buy a $1,000 to $3,000 car that you can get around in for a while till you can save up money to buy a more expensive vehicle.

Because having $3,000 to $5,000 of debt on a personal loan and inexpensive car is a better option than keeping a large debt on your current automobile. And then you can save up and buy a vehicle you can afford—with cash! Learn how to buy a (nice) car with cash here.

If you will commit to buy cars with cash from now on and invest some of the money you were spending on car payments in your own awesome financial future instead, you will be well on your way to retiring with dignity and comfort. Let’s work on building your wealth instead of the bank’s, shall we? 🙂

Learn how to get (and stay!) out of debt here.

 

7. Find other ways to save money on transportation.

You can also save money on transportation by driving less through carpooling or biking or telecommuting, saving money on gas with apps like GasBuddy, saving money on car maintenance and car repairs, driving the speed limit :), finding cheaper auto insurance or saving money on your current auto insurance by taking advantage of discounts, and more. Find more than 30 ideas on how to save money on transportation here.

 

More money-saving tips: Do you want even more ideas on how to reduce your spending in order to find your $200 a month to invest? You can find ways to save money on housing, save money on utilities, and save money on clothing.

Also read this article that has more than 20 ideas for ways to reduce your spending in nearly every budget category.

 

8. Increase your income to help you become a millionaire.

Even though I spend a lot of time teaching people how to spend less money, and I honestly feel that learning to control your spending is the more important of the two factors when it comes to gaining financial stability and building wealth, I feel that earning more income has the greatest potential impact. And let’s be honest—it’s just more interesting and more fun. Because there are only so many things that you can do to reduce your spending (but check out this article to learn more than 20 ways to reduce your spending), but the opportunities to increase your income are nearly limitless!

You can potentially increase your income in many ways, from seeking a raise or promotion at your current job to starting your own business to getting a second job or finding a side hustle to starting a profitable podcast or YouTube channel or starting a money-making blog! 🙂

You can learn awesome, realistic tips for how to increase your income here.

 

9. Automate your investing.

Automating your investing for retirement will help ensure you reach your financial goals. This is so important! So just do it! If you have a 401(k), make sure you have a percentage of your income at least equal to the company match automatically withdrawn from the paycheck and invest in your 401(k). If you don’t have a 401(k) available, then open and set up automatic investing for your IRA through a brokerage company such as Schwab.

When you automate your finances it not only saves time but makes life much simpler—and it ensures that you stick to your financial goals! To learn more about how to automate your finances to simplify your life and start to build wealth, I recommend The Automatic Millionaire by David Bach. It’s one of my favorite personal finance books because it gives simple, actionable steps you can follow.

Learn how to automate your finances to build wealth.

 

 

Final Thoughts on How to Become a Millionaire

With these 9 simple steps not only do you know how to become a millionaire, but if you follow them, you really will become a millionaire! It really will be your financial future!

When you think about it, it’s pretty amazing that for less money than most American households spend on eating out each month, you can set yourself up to be a millionaire, to be financially stable and live comfortably throughout your retirement! The fact that you can retire in comfort for $200 a month is really pretty incredible. So get started today!

To learn more about how to become a millionaire by investing for retirement, read this article.

Want to Track Your Financial Progress?

Check out the free app Personal Capital, which allows you to track how your investments as well as checking and savings accounts are doing and also view your account history to see how your accounts and overall portfolio have done over time. It’s a great tool! Sign up for your free Personal Capital account here.

 

Check out these related articles:

What are your best tips for how to become a millionaire? Are you working toward that goal now? Or have these tips inspired to you work to become a millionaire? What questions do you have? Leave a comment below and let me know your thoughts!

 

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

Join Our Facebook Group!

Join our new, closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

How to Achieve Financial Freedom: 31 Simple, Daily Actions to Take toward Your Financial Independence!

how to achieve financial freedom

Simple Tips for Achieving Financial Freedom

In this article I am going to share tips and steps for how to achieve financial freedom. Learn 31 simple ways that you can work toward your financial independence, starting today!

What is your financial freedom worth? To me, it is worth a lot! I hate the fear that comes with being a slave to debt (and I have been there!). I want control of my money; I don’t want to have to give all my money to the bank and the credit card company and the car loan company. I (eventually) want the financial freedom to work when and where and how much I want (or not at all, if I want)!

I want the freedom to spend my days volunteering in my community or spending time with my family or serving in my church or pursuing other worthwhile goals. I want the freedom to travel and to see the world. What do you want the financial freedom to do? 

With these 31 simple steps to reach financial independence, you can take measurable steps toward building up an emergency fund, catching up on bills, paying off debt, starting to budget effectively, and reaching other financial goals! With these 31 genius money tips you will be able to take small steps each day to work toward achieving your financial freedom!

 

Tip: Save the image above to Pinterest so that you can easily refer to this article on the 31 Day Financial Challenge later! (And share it with others!) 

 

The 31 Day Financial Independence Challenge!

 Want to go one step further and really start to turn your finances around? Join the 31 Day Financial Independence Challenge today! Read on to learn the money-saving tips and accompanying challenges for each day!

how to achieve financial freedom

 

31 Simple Tips for How to Achieve Financial Freedom

Below I share some of my very best tips for how to achieve financial freedom.

These are all things that we are doing or have done to be able to work toward financial freedom ourselves, and they will work for you and your family, too! If you have been wanting a simple plan with actionable steps to help you change your financial situation, then these tips and steps were designed for you!

So take them as tips to help you reach financial independence, or go one step further and do the steps as a 31-day challenge to help you drastically improve your overall financial situation!

With the 31 Day Financial Independence Challenge, you can take a solid step each day to move you toward your own financial freedom!

Sign up below to receive the free Financial Independence Challenge calendar! Start your path to financial freedom today!

 

 

Day 1. Discover your financial why.

Understanding your financial why is crucial to achieving financial freedom.

I’m starting with this point because in some ways it is the most important. Without a huge why, there’s a good chance you’ll quit before you reach your financial goals.

There’s a reason that most people (yes, unfortunately, most people—most adults in the U.S., at least) are overweight and in debt. And it’s because eating ice cream is easier than working out, and spending money is easier than having the discipline to save it and learning how to properly invest it. But a strong why can change all of that.

Take the time today to figure out your why. Why is it worth it to spend less than you earn?Why is it worth it to save money? Why is it worth it to invest? Why is it worth it to have an emergency fund and to get out of debt?  Why is it worth it to save for retirement? Why is it worth it to save to help pay for your kids’ college?

Discover your financial values and your financial priorities, and then set goals and plans that align with your why and your financial values.

Day 1 Challenge: For this first day of your financial independence challenge, identify one financial why that will propel you toward your goals.

 

Day 2. Recognize the power of being content.

One of the main secrets to building wealth and being financially successful is to be content with what you already have. Of course there are other important factors, but if you can’t be content with what you have and if you always feel a driving need for more gadgets, more toys, more stuff—better stuff—then you’re going to struggle at winning financially.

And simple math is the culprit. As much as virtually all of us would like to have all the money in the world to both buy the things we want and do the things we really should do for our financial stability and success, the truth is that most of us simply don’t have the money for both.

While we may live in one of the wealthiest—and the wealthiest, in many respects—eras of the world, we also have no limit to the sheer number of things we can spend our money on. It can be mind blowing and soul numbing at times.

Advertisers do all they can to make us give up all of our hard-earned money—and then some—by spending more than we make and going into debt. But if you want to be wealthy, if you want to be financially independent when you’re older, then contentment is one of the most important factors, and in some respects may be the most important factor for attaining success.

That is because no matter how much money you earn, if you don’t save and invest a substantial amount of it, you’re likely to always be broke. You will always be living paycheck to paycheck, never getting ahead in this financial game we all get to play. To learn about (honestly) differentiating needs versus wants, read this article.

The Apostle Paul taught, “I am not saying this because I am in need, for I have learned to be content whatever the circumstances” (Philippians 4:11). That is one of my favorite scriptures because of the simple and beautiful principle it teaches: “I have learned to be content whatever the circumstances.”

Now, that doesn’t mean that you shouldn’t be ambitious at all or that you don’t need to continually strive to make your situation better. It just means that while you work to make your situation even better, be happy with what you have.

And especially when it comes to money and the stuff that it buys, be careful that you don’t get into the downward spiral of never quite being happy or fulfilled because things could always be a little better, your home a little bigger, your car a little nicer, your clothes a little trendier, and so on.

Day 2 Challenge: For your day 2 financial independence challenge, commit to being content with what you already have, no matter your financial situation.

 

Day 3. Create (or reevaluate) your spending plan.

I truly believe that if you fail to plan, you plan to fail. Most Americans (60 percent) don’t budget. And most Americans (more than 60 percent) also live paycheck to paycheck. Is there a correlation? I think so.

A budget, or spending plan, is basically a list of monthly goals for your money. It is where you decide what you want to spend for each area of your finances. If you are living paycheck to paycheck, you might want to estimate a little high for the different budget categories right at the beginning, just to give yourself a little wiggle room. (I’ll share the best ways to find more money in your budget below). As you create your first budget and then work to tweak it, don’t shoot for perfection and don’t be too hard on yourself.

It will take a few months for you to get most of the kinks worked out and for you to start really budgeting effectively. But when you do, chances are that you will feel like you got a raise, even before you start adjusting your budget in order to spend less and save more. Find tips and steps for creating your first budget here. You can also learn how to stick to a budget here.

Want help getting started with budgeting? Grab my free budgeting bundle below!

 

Day 3 Challenge: For your day 3 financial challenge, take your first steps to creating a monthly spending plan. Or review your current budget to see what adjustments you could make to better reach your financial goals.

 

Day 4. Commit to creating a starter emergency fund, and take a small step toward that goal.

Another crucial point related to how to achieve financial freedom is to have a financial buffer between you and Mr. Murphy. To do so, you need to begin to build a small emergency fund.

If you do not already have an emergency fund, I recommend building up a starter emergency fund of at least $1,000 as quickly as possible by taking on extra work, selling stuff around the house, reducing your spending on things like food and entertainment, or (ideally) all of the above.

At first you may feel like you can put only $50 or $100 a month toward your emergency fund, but increase this as quickly as you can. Try to have $1,000 (or $500 if you make a household income of less than $20,000 a year) saved within a couple of months. If you feel more comfortable with a little more of a safety net, then you can increase that to up to one month’s worth of expenses.

And then work to save a fully funded emergency fund once you are out of consumer debt. Learn here how to build a three- to six-month emergency fund.

Day 4 Challenge:  Figure out how much you can realistically allocate in your budget to begin to save a starter emergency fund of at least $1,000. Set up automatic transfers (even if you set them to start next month or in a couple of months) to begin funding your starter emergency fund.

 

Day 5. Make a commitment to get out of debt.

One of my favorite financial gurus often says that it is impossible to dig yourself out of a hole when you keep filling it. And it is impossible to build wealth when you continually give all of your money to the auto loan company, the furniture store, the credit card company, and the mortgage company.

That is why a crucial part of achieving financial freedom is to get (and stay!) out of debt. To get out of debt as quickly as possible, I recommend using either the debt avalanche method or the debt snowball method.

You will save some money on interest if you use the avalanche method, but for most people, I would recommend the snowball method, or else a combination of the two, where you begin with the snowball method and then switch to the avalanche method once your commitment level to getting out of debt is rock solid.

The snowball method is the one we used, and I feel that it works best in most cases because it keeps your motivation high because you have more frequent debt payoff wins. Read this article to learn more about how to get (and stay) out of debt.

Day 5 Challenge: For your day 5 challenge, dig into your finances (even if it might be scary; you can do it!) to figure out exactly how much debt you have. Then decide whether you would prefer the debt snowball method or the debt avalanche method, and decide which debt you will pay off first. Set a goal to get it paid off within a specific amount of time. (Then work on paying off your other debts, as well.)

 

Day 6: Review your recent spending, and see where you can make cuts.

Review all of your recent purchases and expenses to see where you can reduce your spending.

By examining your debit card or credit card transactions online and your recent receipts (especially when you used cash), you will likely see areas that you can quickly cut. Many of those might be in the areas I will discuss below.

(Note: If you don’t currently keep your receipts, consider doing so! Just stuff them in a large manila envelope or binder, at least, so you will have them to review later as needed.)

Day 6 Challenge: For your day 6 challenge, review your bank statements or transactions online and your receipts, and list places where you can spend less money.

 

Day 7. Consider how you could cut entertainment expenses.

Now, specifically take a look at your entertainment spending.

When I talk about ways that people can spend less money, the first place that I suggest that they look is at their entertainment spending. Consider whether you could save money in any of the following areas:

  • Your cable or satellite bill.
  • Your internet bill.
  • Your cell phone bill.
  • Going to the movies.
  • Going to music concerts.
  • Going to sports events.
  • Video gaming.
  • Purchasing electronic devices.
  • Paying subscriptions to magazines and paid TV services (Netflix, Sling, and so on—again, videos from the library are free!).
  • Paying for memberships to the gym, rec center, museums, aquariums, or zoos, and the like.
  • Participating in recreational activities like skiing, bowling, miniature golf, playing arcades, and so on.
  • Christmas shopping.
  • Going on vacations.
  • Your personal monthly spending money (some people call it fun money or blow money).

Find even more ideas for how to save money on entertainment.

And don’t worry! Just because you are looking to save money in order to reach your financial freedom doesn’t mean that you can’t have a great time! Check out this article with 90+ fun, free activities you can do without spending any money!

Day 7 Challenge: For your day 7 financial independence challenge, look at your entertainment spending, and see if you can make spending cuts in at least 3 areas.

 

Check out these related articles:

12 Best Tips to Save Money on Entertainment
91 Fun, Free Activities to Do during a No-Spend Challenge!
151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money!
5 Super Simple Steps to Save $1,000 for a Debt-Free Christmas
11 Ways to Save Big on Your Christmas Shopping
4 Powerful Principles of Gratitude to Change Your Financial Life
Contentment: 9 Powerful Principles That Will Help You Save More Money and Reach Financial Success

 

Day 8. Find ways to save money on eating out.

Another one of the easiest ways to save money is to spend less money eating out. The best way to save money on eating out is to eat out less!

To start saving money eating out, take small steps from where you currently are. So, for example, if you eat out most days (or even every day) for lunch at work, start bringing a lunch from home. Keep things simple, especially at first. Bring leftovers you can easily reheat in the break room microwave. Bring a sandwich or simple salad.

Similarly, if you eat out every week as a family, cut back to eating out once a month or every other week. And go to less expensive restaurants when you do eat out.

You can also save money eating out by finding deals online, eating appetizers or smaller meals, save half of your meals for lunch the next day, share an entrée with another person, order water instead of a drink, skip dessert, and more!

There are lots of other ways that you can save money eating out, as well. Find more ideas to save  money when eating out here.

Day 8 Challenge: For your day 8 financial independence challenge, make a goal to spend less money eating out. This might mean brown bagging your lunches at work most days, going out to eat less as a family, going to less expensive restaurants, or all of the above.

 

Day 9. Make a simple meal plan.

One of the best ways that you can save money on food in addition to reducing how much you spend eating out is to make a weekly or even monthly meal plan. Find out how to plan a month’s worth of meals in less than an hour!

As with many things in life, one of the most powerful things you can do to save money on groceries is to start with a solid plan.

Get this awesome free weekly meal planning worksheet (sign up just below) to get organized and plan your week’s or month’s worth of meals! The meal planner comes with awesome meal planning tips that will help you save a ton of money (and time!) on your grocery shopping!

 

 

Day 9 Challenge: For this challenge, create a simple meal plan (the free meal planner above makes this a snap!) for at least a week to help you save time and money!

 

Day 10. Find other ways to slash your grocery budget.

As I mention above, you can save a ton of money by reducing your grocery budget. I talk quite a bit on my blog about finding ways to save money on groceries, and the reason is that there are so many ways to do it, and food is such a big part of most families’ budgets. Read this article to learn more than 70  ideas to save money on groceries (without having to use coupons!)

Some of the biggest ways that you can save money are by doing the following things.

Shop with a grocery list.

Another way that you can save money on groceries is to shop with a grocery list. This tip goes right along with making a plan.  In fact, my free weekly meal planner (that you can get by signing up with the form just above) includes a shopping list as part of it.

Once you have created your meal plan, use it to create your shopping list for the week (or two weeks) by seeing what grocery items you need (what you are out of or low on) and adding those items to your shopping list.

Be sure to look in your fridge, freezer, cupboards, and pantry and to consult this week’s grocery store ads while you create your grocery shopping list!

Use a price comparison cheat sheet!  

One of the things that saves us a lot of money on groceries throughout the year is to comparison shop. I comparison shop on virtually everything, so of course I am going to comparison shop on one of our biggest yearly expenses! And you should, too!

Use this awesome, super handy grocery price comparison cheat sheet to help you spot great deals and pass over grocery items that are overpriced.

Use money-saving apps when you do your grocery shopping!

With money-saving apps such as Rakuten (formerly Ebates) and Ibotta, you can earn money by shopping for things and at places where you would shop anyway.

With Rakuten, you generally buy items through their website to save up to 40 percent on purchases. It is primarily an online service, and a great way to save money on everyday purchases you were going to make anyway. Sign up for a free Rakuten account here.

Ibotta, on the other hand, is an app you use primarily after you make purchases at brick-and-mortar stores. Because of this, you can actually sign up for and use both the Rakuten and Ibotta apps to save money on purchases (like I do!). Sign up for a free Ibotta account here.

You can literally sign up for both of these money-saving apps in just seconds and let the savings start stacking up.

Eat the food you already have on hand.

Another thing that can help you save money fast is to eat the food you already have in your house in order to slash your grocery spending. Most of us have enough food in our houses that we could go for a significant amount of time, if we had to, without buying any food.

So clear out your fridge, cupboards, freezer, and pantry. There’s a good chance you have a week’s worth or more of food in your home (many people have more than a month’s worth of food on hand in their house, which is a great thing in case some kind of emergency happens and you need it!), and using that food up periodically is a good idea to make sure nothing goes bad.

But, also, if you do find food items that have expired, don’t automatically toss them out. The expiration or best by/use by dates are just guidelines, and you can eat most things months past the best by date without any noticeable loss of quality.

 

Cut down on sweets, snacks, juice, beer, and so on.

You can save a ton of money by just sticking to the main food groups. Eat fewer packaged and overly processed foods. Focus on your whole wheat grains, vegetables, fruits, and inexpensive lean meats and proteins. (And both your wallet and your waistline will thank you!) To help you save money fast, leave the rest of the junk (food) on the grocery store shelf.

Plan to have a few meatless meals each week.

Meat is one of the most expensive foods you can buy, so by eating more meatless meals you can save a lot of money. Consider going meatless for a few dinner meals a week, or even plan a whole week or two week’s worth of meatless meals if you want to save money even faster.

Buy only items that are in season.

To save money on produce, buy fruits and vegetables that are in season.

Buy grocery items that are on sale.

Check the week’s grocery ads, and then plan what you buy for that week’s meals around that.

Eat unconventional and smaller meals.

If you really want to save money on groceries, then plan really simple meals like egg omelets, fried eggs with toast, grilled cheese sandwiches, peanut butter and jelly sandwiches, fried eggs with rice, cereal with milk, pancakes or waffles, chicken with rice, spaghetti, macaroni and cheese, ramen noodles with vegetables, pasta alfredo, tacos, bean and cheese burritos, and so on.

Want more ideas for how to save money on your grocery shopping? Read this article for more than 70 suggestions for how to slash your grocery bill without needing to use coupons!

Day 10 Challenge: For your day 10 financial challenge, list at least 5 ways that you can immediately cut your spending the next time you go grocery shopping.

 

 

Day 11. Brainstorm ways that you could spend less money on transportation.

Another solid step toward your financial independence is to spend less money on transportation-related expenses.

 Here are some easy ways that you can save money on your transportation costs:

  • Drive the speed limit. 😊
  • Drive less by carpooling, biking or walking, taking public transportation, telecommuting, combining errands, and more.
  • Use apps like GasBuddy to save money when purchasing fuel.
  • Shop around to make sure you are getting the best deal on auto insurance.
  • Wash your car yourself rather than spending money at the car wash.
  • See if you can get rid of your car payment(s). (Could you get by with one car? We were a one-car family for years. Or could you buy a less expensive car and sell your more expensive car with payments?)
  • Find ways to save money on car maintenance and repairs by looking for a reliable and trustworthy but less expensive mechanic. Also save money on auto parts by shopping at places like online parts store RockAuto. (They truly have amazing prices!)

And save in other ways on your transportation costs with more than 30 ideas for how to save on transportation costs.

Day 11 Challenge: For your day 11 financial independence challenge, figure out at least one way that you will save money on your transportation costs.

 

Day 12. Save money on housing-related expenses.

For most families, housing is their largest expense. Fortunately, there are a lot of things that you can do to save money on housing, even if you own your home and so your mortgage is fixed.

To save money on housing expenses, look at these ideas:

  • Consider refinancing your home if interest rates have dropped significantly. (But don’t lengthen the term of your loan! Keep it the same or, even better, shorten it! :))
  • Talk to your insurance agent and find ways to lower your homeowners or renters insurance.
  • Save money on alarm monitoring. Check out SimpliSafe; you can get inexpensive (but awesome) alarm monitoring through them for just $15 a month!
  • Rent a cheaper place.
  • Consider moving in with family or friends.
  • Get a roommate (or roommates).
  • Rent out your spare bedrooms on sites like Airbnb and Booking.com. If you are able to do this, you could earn well over the cost of your monthly mortgage or rent payment. And you can meet some amazing people in the process.

For even more ideas for saving money on housing costs, read this article with 30+ simple ways to save money on housing and related expenses.

Day 12 Challenge: For your day 12 financial freedom challenge, write down at least one way that you will save money on housing-related expenses.

 

Day 13. Find ways to save money on your utilities.

You can also save money by cutting your utilities costs.

 To reduce your utility bill so that you can save money fast, try these free and easy tips:

  • Turn down (to 62 degrees or lower, if you can) and turn up your AC (to 78 degrees or higher, if you can).
  • Wash all of your clothes in cold water. Washing machines are so powerful these days they will still get your clothes clean even with cold water.
  • Hang your clothes out to dry.
  • Use your dishwasher less. Wait till it is full to run it, and consider using your dish drain and washing the dishes by hand.
  • Turn off lights, TVs, computers, radios, nightlights, and so on when they are not in use.
  • Unplug appliances and electronics when they are not in use.
  • Open your curtains during the day to let in the sun to warm up your house during the winter or keep them closed to keep out the sun to help keep it from heating up too much during the summer.

Read this article for more ideas on how to save money on utilities during the summer and this article for ideas on how to save money on utilities during the winter.

Day 13 Challenge: For this challenge, find at least 3 ways that you can reduce your energy bill this month. 

Day 14. Find ways to save money on clothing, shoes, and accessories.

Another thing you can do to save money is to not spend so much on clothing and shoes.

My favorite tip for saving money on clothing if you have kiddos is to set up a clothing co-op of sorts. If you have children, see if you can swap children’s clothes with your nieces and nephews or with children from your neighborhood or church.

My sisters and I share clothes for our kiddos, and it is an awesome way to save money (and help out the environment just a little)! Plus, I just love seeing my nieces and nephews in clothes that my kiddos wore! It brings back such fun memories!

You can also save a bunch of money on clothes by shopping the sales (such as the after-season sales) and by shopping at discount clothing stores, thrift stores and second-hand stores, garage and yard sales, websites like eBay and Craigslist, and more!

Want even more ideas? Check out this article with 13 must-know ideas to help you save money on your clothes buying.

 Day 14 Challenge: For your day 14 challenge, write down at least one way that you will commit to spending less money on clothes, shoes, or accessories.

 

Check out these related articles:

How to Get (and Stay) out of Debt!
17 Must-Know Tips to Rock Your Budget
13 Top Tips to Help You Stick to Your Budget
16 Best Tips to Help You Stop Living Paycheck to Paycheck
15 Top Tips to Help You Finally Stop Overspending
31 Budget-Friendly Easy and Cheap Dinner Recipes for under $5
42 Cheap and Easy Budget-Friendly Meals for under $5
73 Easy Ways to Save Money on Groceries without Coupons!
151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money!

 

Day 15. Find ways to make more money.

Though this article focuses on ways to spend less money in order to achieve financial freedom, finding ways to make extra money can be even more effective to help you reach your financial goals.

The reason is simple: there is only so much that you can realistically do to save money (though there is a lot, for sure!), but your potential to earn more money is virtually limitless!

There are more ways to make money today than there have ever been before, and many of these you can do from the comfort of your own home after you get back from work. Some of my favorite ways to make more money are below.

  • Work overtime. If you have the opportunity to do so, working overtime is a great way to help you to save money quickly.
  • Ask for a raise or promotion. If it’s been a few years since you received a significant raise and you’ve been an exceptional employee at work, make a list of your contributions and your accomplishments, and schedule a meeting with your boss to request a raise or a promotion. Focus on ways that you’ve earned the company money or saved them money. If you learn that a raise or promotion isn’t going to happen right away, ask what specific steps you can take in the next year or two to make it a reality. Read this article for more information on how to seek a raise or promotion.
  • Do freelance work. If you work in a field that lends itself to doing freelance work, take advantage of that opportunity to earn extra income to help you save money fast! I have been doing freelance writing and editing since before I graduated from college with my English degree and editing minor, and doing freelance work has not only helped me gain experience in other areas besides what I do for my full-time job but has also at times (when I wanted to give the time to it) brought in significant additional income.
  • Do coaching or consulting. Similarly, if you have job experience or a skill that lends itself to coaching or consulting, put that skill to use! Popular areas for consulting include human resource (HR) consultant, public relations (PR) consultant, marketing consultant, business management consultant, and accounting consultant. Popular areas for coaching include financial coaching, job coaching, personal fitness coaching, and leadership coaching. Look for opportunities on indeed.com or your favorite job website.
  • Get a (second) job. If one spouse is available to get a second job in the evenings or on Saturday, for example, then this is another great potential way to earn additional income. And if you are a one-income family, or if one of you works only part-time, you might want to consider reentering the workforce or going full-time temporarily in order to save money more quickly.
  • Earn passive income. Some options for earning passive income are to create a product you have someone sell, write a book, create a money-making podcast or vlog, develop an online course, or participate in affiliate marketing. Read this article to learn more ideas for earning passive income.
  • Sell stuff on eBay or Amazon. If you have a good eye for a bargain, you can buy items at thrift stores or garage sales and sell them for a profit on eBay, Amazon, Craigslist, or your local online classifieds.
  • Sell your clothes to consignment shops. If you’re like most people, you probably have more clothes than you need. So use them to bring in some quick cash!
  • Have a garage sale. Declutter and earn money, all at the same time!

Check out this article to learn more about increasing your income!

Day 15 Challenge: Find at least one way that you can work toward increasing your income starting this week. Write down your goal, and put it where you will be reminded of it often.

 

Day 16. Look at possible side hustles.

If you would rather earn money without working another regular job or working freelance or doing consulting or coaching related to your full-time job, there are a lot of things you can do to earn a little extra income with an unrelated side hustle.

Some ideas include starting your own small business where you turn a hobby into a money-maker, walking dogs, babysitting, being a virtual assistant, or driving for Uber or Lyft.

Another idea for an awesome side hustle is to start a money-making blog. The potential for significant income is one of the reasons that I started this blog. If you love helping people and enjoy writing, being a blogger might be a great fit for you. In addition to great income potential (check out these amazing income reports of bloggers who make $10,000 to $100,000 or more per month!), there are many other benefits of being a blogger, such as being able to be your own boss and work on your own schedule. Learn how to start a blog for less than $5 a month.

Discover how to start a side hustle and find out about many side hustles that you can explore.

 Day 16 Challenge: For this financial challenge, come up with at least one side hustle that you would enjoy doing in your spare time to bring in a little extra cash.

 

Are you ready to start making more money? Sign up below to participate in the free 10-day Earn More Money, Change Your Life challenge and learn actionable steps you can start taking today to really increase your income!

Day 17. List stuff to sell on your local online classifieds or with Craigslist.

Many of us (myself included :-\) have more stuff than we know what to do with. So why not sell some of that stuff, declutter your life a little, and have a little more money in your pocket? Here are some ideas of things you might sell on your local online classifieds or through Craigslist or Facebook Marketplace:

  • Clothing and shoes
  • Electronics
  • Furniture
  • Computer and cell phone equipment and accessories
  • Appliances
  • Game consoles and video games
  • Outgrown baby and kids’ clothes, toys, and gear
  • Unused pet supplies and gently used paraphernalia

Day 17 Challenge: Find at least one thing you can sell through your local classifieds, Craigslist, Facebook Marketplace, or a similar app.

18. Plan to do a no-spend challenge.

I love no-spend challenges because they are an excellent way to save money fast! We have done a few no-spend challenges now in our family, and they have been great. You can learn all about how to do a no-spend challenge here.

If you have never done a no-spend challenge, give it a try! A no-spend challenge is where you go for a week, two weeks, or even a month or more either without spending money or without spending money on anything besides the bare essentials. 

Or you could do a no-spend challenge in just a particular category, if you have a particular area where you could fairly easily save a bunch of money because you spend a lot in that category, such as clothing, eating outor entertainment.

To save the most money quickly, do a complete no-spend challenge. You could start with a one-week no-spend challenge the first time, and then do two weeks, and then go for a whole month. Or if you really want to turbocharge your savings and short-circuit your spending habits, you could go all in and start with a one-month no-spend challenge. 

Learn more about how to do a no-spend challenge here. And learn about many of the benefits of doing a no-spend challenge here. And be sure to grab your no spend challenge printable below!

Day 18 Challenge: For your day 18 financial challenge, commit to do either a no-spend challenge in a specific budget category or a complete no-spend challenge, and plan to do it for at least a week. Plan to do your no-spend challenge within the next month or two. (This would be a great way to start your finances with a bang after the summer, for example.)

And be sure to grab the no spend challenge tracker printable below to help you succeed!

 

Day 19. Automate your money and your savings.

Automating your finances is another great step that you can take toward achieving financial freedom. I am also a huge fan of automating your money. Automating your money is an easy and painless way to ensure that you are sending your money where you want it to go.

Automating your money can help you to save money fast by allowing you to send money directly to savings accounts, credit card companies, car loan companies, and more. This will help you save up money quickly and pay off debt quickly. Automating your money can help you to easily save up for a purchase, pay off a debt, pay for an expense, and more.

You can (and should! :)), as soon as you can, automate your finances to save more money, pay your bills, pay off debt, save for retirement, save for large purchases, fund your children’s college educational savings accounts, and ultimately find financial freedom.

Learn all about how to automate your money here.

Day 19 Challenge: Automate at least one area of your money (by tonight if you can, or at least by this weekend).

 

 

Day 20. Sign up for a free rebate service such as Rakuten or Ibotta.

With rebate services such as Rakuten (formerly Ebates) and Ibotta, you can earn money by shopping for things and at places where you would shop anyway.

With Rakuten, you generally buy items through their website to save up to 40 percent on purchases. It is primarily an online service, and a great way to save money on everyday purchases you were going to make anyway. Sign up for a free Rakuten account here.

Ibotta, on the other hand, is an app you use primarily after you make purchases at brick-and-mortar stores. Because of this, you can actually sign up for and use both the Rakuten and Ibotta apps to save money on purchases (like I do!). Sign up for a free Ibotta account here.

You can literally sign up for both of these money-saving apps in just seconds and let the savings start stacking up.

 

Day 20 Challenge: Sign up for a money-saving app like Ebates or Ibotta.

 

Day 21. Check out a personal finance book (or books) from the library. And then read it.

As one of my favorite financial experts, Dave Ramsey, says, leaders are readers. I work full-time as a professional editor, so I literally read all day long, and I’ve been a bookworm for as long as I can remember. One time, when I had a long commute to work, I even started reading all of the personal finance books that our library had, from A to Z. I made it more than halfway through the alphabet before something else eventually caught my interest and I started reading other things, but it was a lot of fun and a great experience to read all of the differing perspective on money. Some of my favorite personal finance books are these:

The Total Money Makeover by Dave Ramsey. Possibly my favorite personal finance book, this is the best one I have read as far as laying out a simple plan that you can follow to save, get out of debt, and invest to build wealth.

The Automatic Millionaire by David Bach. This book explains the benefits of automating your finances so that you can set up systems to help you win with your money. By automating your finances you can save and invest in order to build wealth and retire in style. Set it and (almost!) forget it!

Rich Dad, Poor Dad by Robert Kiyosaki. Though I don’t believe in all of the principles that the author follows (such as being highly leveraged [using a lot of debt] to build wealth), I definitely do believe in his entrepreneurial spirit and the importance he places on gaining financial literacy.

Love Your Life, Not Theirs by Rachel Cruze. This book emphasizes that if we always focus on what we don’t have and on comparing ourselves to others, then we will always be unhappy and broke. Rachel teaches the importance of getting out of debt in order to avoid the worry and stress of living paycheck to paycheck and teaches sound financial principles such as living on a budget and saving for the future that bring joy and build a solid financial foundation.

Your Money or Your Life by Vicki Robin and Joe Dominguez. This book takes a different approach from most of the personal finance books out there. It emphasizes discovering your values and then aligning your life to follow those values. It also shares the intriguing idea of looking at everything you buy in terms of number of hours worked, and it suggests considering whether the things you buy are really worth the number of hours of life energy spent to pay for them. The authors suggest the idea of potentially working less, and living more.

Day 21 Challenge: Put at least one personal finance book from the library on hold tonight, and then check it out and read it.

 

Day 22. Read another one of my articles here on this personal finance blog. 🙂

This is a shameless plug here. But if you’re interested in learning how to earn more, spend less, save more, and invest more, then you’ve come to the right place—this blog is for you! Some of my favorite blog articles are listed below.

Day 22 Challenge: Read at least one additional blog article this evening to help you learn more about personal finance and reach your awesome financial goals.

 

Day 23. Pay a little extra money toward your credit card debt, car loan, or home loan.

Become debt free is a wonderful step to take toward achieving financial freedom! If you have debt, work to pay it off as quickly as possible. Take a few minutes to look at your budget right now (if you don’t have one yet, download a simple one above that you can start using today!), and find areas where you can save money in order to start paying down your debt.

The more debt you can pay off as quickly as possible the better, but for now if all you have is a little room in your budget to start making small extra payments, that extra principal toward your debt will really add up over time. For more information on how to stop relying on credit cards and pay off your credit debt, read this article. And read these articles for more information on paying off your car loan or paying off your home loan (become mortgage debt free! woo hoo!).

Day 23 Challenge: For this challenge to help you achieve financial freedom, choose at least one debt you have, and transfer money or set up an extra or larger than usual payment to pay a little extra toward that debt.

Day 24. Donate to charity or do an act of service or act of kindness.

Even though this may actually cost you a little money or time rather than saving it (unless you choose to use your charitable donation as a tax deduction—double win!), I believe there is a strong correlation between being a generous giver and managing your money well in order to build wealth. I feel that any money we give or time we give will be returned to us, and then added upon.

Day 24 Challenge: Find at least one person that you can serve, or sign up to volunteer with one of your favorite nonprofit organizations.

 

Day 25. Sign up for term life insurance.

This, too, costs money in the short-term, but in the long-term it will save your family from likely financial disaster if you ever need the insurance protection if you or your spouse passes on.

If you are a parent of dependent children, then you need life insurance. To find good term life insurance agencies, check out Zander Insurance, a firm that will shop around among the different insurance companies to find you the best price for your life insurance. It’s the company we used to get our own life insurance.

 Day 25 Challenge: Especially if you have children, get a free term life insurance quote from Zander Insurance or another insurance broker or agency, and begin the process to get term life insurance for you and your spouse.

Day 26. Cut up your credit cards and close the accounts, and get a rewards debit card, instead.

Getting out of credit card debt is an important part of how to achieve financial freedom. I know credit cards may feel like nearly a necessity for many people in our society, but you really don’t need them. And if you have credit card debt (if you don’t pay off your credit card bill every month), you’re really much better off without them. If you love the rewards that you get from your credit card, try these reward debit cards, instead:

The PayPal Debit MasterCard is the rewards debit card that I have had and used for years now. It earns you 1 percent cash back on all signature-based purchases (where you don’t use a PIN). Opening an account with PayPal is free, and another advantage that I really like is that you can link your PayPal card to various checking accounts and transfer the money from whichever account you want into your PayPal account to cover your purchases. There are no minimum balances (in fact, you don’t have to keep any money in your PayPal account at all; it will just pull the funds from whichever account you have set up as your default backup account) and no fees.

Discover Bank has a checking account that pays 1 percent cash back on debit card purchases. There are no monthly fees or minimum account balance requirements.

American Express Serve cash back debit card offers 1 percent cash back for every $1 you spend with your prepaid debit card. There is no cap on the amount of cash back you can earn.

The SunTrust Delta SkyMiles World debit card offers 1 mile for every $1 you spend on PIN point-of-sale transactions and 2 miles for every $1 you spend on direct purchases from Delta.

The Key Bank rewards debit card offers one reward point for every $6 you spend on qualifying purchases, and there is no cap on the amount of points you can earn.

Though there aren’t nearly as many debit card rewards programs as there used to be, they still exist, and if you love the rewards but have trouble managing your spending with credit cards (that is, you carry a balance on your credit card), then they’re a great alternative.

Read this article for information about additional rewards debit cards available.

For information about how to stop relying on credit cards, read this article.

Day 26 Challenge: If you have credit card debt, cut up your credit cards (be sure to still pay them off!), and sign up for a rewards debit card, instead.

  

Day 27. Download a personal finance app to help you manage your money.

There are several great personal finance apps that are worth checking out. Here are a few:

Mint. We used Mint for years to get a good idea of our overall financial situation because it allows you to link all of your bank accounts and shows you how much you spent overall and your individual and overall bank balances. It is a good, free budgeting tool. It also does link to your investment accounts, but Personal Capital is much stronger in this area. And so now that we are investing more in nonretirement accounts (for one thing, we’re working on our 100 percent down payment for our next house! :D), we’ve switched to using Personal Capital. However, if you’re focused primarily on budgeting and monitoring your overall bank balances and you want a good, free app to do that, then this is a good choice.

EveryDollar. Created by Dave Ramsey and team, this is another popular budgeting app. EveryDollar is a zero-based budgeting tool, which means that it requires that you designate all of the money you earn into the various budget categories you create, without having any money left over (which is what you should do when you budget, by the way, so that there’s no leftover slush money that just sort of evaporates into thin air). There are both free and paid versions of this app (the paid version integrates with your checking account and categorizes your spending automatically).

You Need a Budget (YNAB). Another popular budgeting tool, one benefit of You Need a Budget is that it notifies you if you don’t follow the budget you created and helps you to adjust in other categories to keep your overall budget balanced. Like EveryDollar, it is a zero-based budgeting tool. It’s designed to help you stop living paycheck to paycheck by encouraging you to work toward spending last month’s paycheck rather than this month’s (so cool; a $1,000 buffer in your checking account can also help accomplish the same thing). The app is easy to use and is a good tool for those new to budgeting. It is available for desktop and mobile devices. You can also sign up for online classes to help you start to budget effectively. As of 2018, it costs $6.99 per month.

PayPal. PayPal is a great tool that allows you to request payments from others as well as pay others. If you use it to pay or receive money from friends or family, there are no fees. Otherwise, there is a small fee for each transaction. You can also get a PayPal debit card to use to make purchases. One benefit of PayPal is that if you use it for your business, you can connect a rewards debit card to your account that pays 1 percent cash back. I’ve had their rewards debit card for years, and I love the guilt-free rewards (since I don’t like credit cards).

Venmo. Popular among millennials, the app Venmo was purchased by PayPal and is another app that lets you pay people and share payments among family and friends.

Acorns. Acorns is an easy-to-use investment app that automatically invests your spare change (by rounding up to the nearest dollar after purchases), a one-time contribution, or a recurring amount you designate in a wide range of diversified stocks and bonds.

Personal Capital. If you want to be able to track your financial progress—such as your debt repayment, your progress toward a financial goal, and the growth of your retirement and other investment portfolios—then you should sign up for a great free app called Personal Capital. It’s fun (for nerds like me) to be able to see all of that financial information together in one place in order to easily see our overall financial picture and be able to look back over time to see how our savings and investment accounts have grown. This is (at least so far) my favorite personal finance app. Sign up here to open your free account today.

Day 27 Challenge: Download at least one personal finance app that will help you better manage your money.

 

Day 28. Open some high-yield savings accounts and set up automatic transfers.

If you don’t already have a high-yield savings account, I recommend opening a checking account and savings accounts with an online bank that has a great reputation that you can trust and that pays a great interest rate, like this one.

Yes, that’s right—I said savings accounts, multiple.

And the fact that you can super easily open multiple savings accounts to save for things like vehicle purchases, vehicle maintenance, house maintenance, auto insurance payments, life insurance payments, Christmas, other gift giving, vacations, and so much more is just awesome.

These funds to save for various larger expenses are sometimes called sinking funds, and they are an important part of getting and staying out of debt and building wealth.

If you don’t have an emergency fund, start building your initial, starter emergency fund now before saving for larger purchases you will eventually need. So with the money from your first paycheck (if you get paid twice a month, for example), set up automatic transfers with your bank to transfer $150, for instance, directly into your emergency fund savings account.

After you have a fully funded EF, you should open various other savings accounts (see the list above) and set up regular automatic transfers to transfer a certain amount of money each paycheck into the various accounts.

Day 28 Challenge: If you don’t already have high-yield savings accounts, open a savings account at an online or other bank or credit union with good interest rates. And then open several more savings accounts (at the same bank, linked together). Then start to fund the various savings accounts so that they can serve as sinking funds you can use to pay cash for expenses like vehicle maintenance and repairs, vehicle purchases, home maintenance, vacations, Christmas shopping and gift giving, and more.

 

Day 29. Set a retirement goal.

Investing regularly for retirement is a wonderful way to work toward achieving financial freedom.

And to have an awesome retirement, you need to plan for it! Most people have never taken the time to consider how much they should have for retirement. But you are not most people! (Not anymore, anyway! :)) So take a little time today and figure out how much you should have saved by the time you retire.

In order to determine how much you should have saved for retirement (and the awesome thing is, it’s probably less money than you think you will need), first do this: Determine what you feel like your annual salary will need to be to provide a comfortable living. As you consider this number, keep these things in mind:

  • You should plan to not have any consumer debt during retirement. That means no car payments, RV payments, credit card debt, and so on.
  • You should also have your mortgage paid off long before you retire (don’t plan on having to make a mortgage payment during retirement).
  • You should have a good-sized emergency fund so that financial difficulties do not completely derail what might be a fairly fixed income. (And you should plan to have one because having a three- to six-month emergency fund is just a good idea for everyone because life happens.)

If you have around 20 years left till you hope to retire, an approach you might take to get a rough idea of your needed retirement savings could be to take the amount of your current monthly expenses (if you anticipate that they will stay about the same, adjusted for inflation), multiply that amount by 12, and then double that number.

So if your monthly expenses are $5,000, you would multiply that by 12, which is $60,000, and then double that to $120,000. Then multiply that number by 10 to 12, and that would be the rough amount that you could aim to have in your retirement accounts. So, for our example, that would be $1.2 to about $1.5 million.

In calculating these numbers, we are going to assume that you will keep your retirement money in good growth stock mutual funds throughout retirement so that they can average about a 10 percent return (really over the long-term they can average higher than that, but 10 percent is a nice round number). So as long as you keep your money in the stock market in good mutual funds with good, long track records, you can earn on average about $120,000 a year in our hypothetical situation.

And you would never even really have to touch the principal in your retirement accounts (so you would always keep the original $1.2), so you could have it as money you could draw on for occasional fun splurges or to slightly increase the amount you draw out each year to keep up with inflation.

If you have about 30 years till retirement, you could use the same formula, but multiply your monthly expenses by 12 and then multiply that number by 2.5 to 3. So if you predict you would need $50,000 to pay for your expenses each year, you could multiply that number by say 2.75, and that would be about $137,500 a year you would need in retirement. And you could then multiply that number by 12 (to give yourself a little more cushion), and so you would need about $1.65 million in your retirement account.

Another great option to try to determine how much you should save is to use an online retirement calculator. Especially if you have longer than 30 years till retirement, try an online retirement calculator found by Googling “how much should I save for retirement.”

When you’re willing to keep your money in the stock market during the span of your retirement, the risk over the long-term really is quite low, but you’re able to maintain your nest egg (principal) and not deplete it.

 Note: These are my rough estimated calculatioins, but I am not a retirement planner or investing professional! Please do your own research with an investing professional! 🙂

Day 29 Challenge: Do your best to calculate how much you  should have saved for retirement. And then figure out, by calculating backwards, how much you should be saving each month to reach that goal.

 

Day 30. Begin contributing to your company 401(k) or other retirement plan or increase your contribution to at least 10 percent (and preferably 15 percent).

If you are wanting to do something that will have amazing results for your future, start regularly contributing to your company 401(k) or other retirement plan, or increase your contributions to at least 10 percent (if you can manage 15 percent, increase it to that). Because of the awesome power of compound interest, you’re relatively small efforts now can have huge dividends in the future (literally!).

And because most employers also contribute to their employees’ retirement plans by matching a portion of what employees save, the results are even better (often twice as good—when the company matches dollar for dollar!).

Let’s say, for example, that you make $40,000 a year, or about $3,333 a month, and that you contribute 10 percent of your income and receive a 3 percent match on your contributions from your employer. So you would invest $333 a month into your Roth 401(k) (because you would pay taxes now before you invest but all future earnings are tax free!), and your employer would invest $100.

If you did that from age 25 to age 60, because you decided to retire a little early, and you earned a reasonable 10 percent average annual return, you would have $1,549,066 in your retirement account. Even with inflation and $1.5 million not being what it used to be, I think you could get by on that. 🙂

Day 30 Challenge: For your day 30 financial freedom challenge, make a solid plan to begin investing in your company retirement plan if you have not done so yet. Once you are out of nonmortgage debt, start investing at least 10 percent of your income toward retirement as soon as you are able, and 15 percent is even better for an awesome retirement. 🙂

Even if you can contribute only 1 percent or only $100 a month, start there, and then slowly increase your contributions over time. (We started by contributing 2 percent to retirement way back when, and we felt that we were doing great! :))

 

Are you ready to learn more about investing and start seriously saving for your retirement? Do you want to change your financial life? Do you want to be able to invest like you need to to save for the retirement you dream of? Do you want to be able to travel extensively, pursue hobbies passionately, and give generously? Are you ready to build wealth and work toward financial freedom? My new, free Invest Your Money, Change Your Life 5-day challenge will show you how. Sign up below!

 

Day 31. Open and begin to fund an IRA or Roth IRA.

If you are already contributing in your Roth or traditional 401(k) up to the maximum amount that your company will match (say, for example, that they will match your contribution up to 5 percent of your income), then the next best thing you can do after you contribute that 5 percent to your Roth 401(k) may be to contribute the rest of the money you designate for retirement savings into a Roth IRA. (Unless you are a very high income earner and think you will be in a lower tax bracket in retirement than you are now, in which case you may want to invest in a regular, or traditional, IRA).

Save enough more in your Roth IRA that you are saving at least 10 percent of your income toward retirement, and if possible, contribute 15 percent of your income toward retirement.

Ready to start investing in a Roth or traditional IRA but not sure where to start? Get the Roth IRA cheat sheet to get simple step-by-step instructions for how to open a Roth (or traditional) IRA in about 10 minutes!

The reason to invest the remaining amount of your money for retirement in a Roth IRA rather than contributing everything in your company 401(k) is that when you contribute to an IRA, you have a much wider array of options to choose from as far as the mutual funds available to you to invest in.

Where most company 401(k) plans probably have at most 20 mutual funds that you can choose from (my company 401(k) doesn’t even have that many), with a brokerage firm such as Schwab (where we do our Roth IRA investing as well as the bulk of our nonretirement investing) you have literally thousands of mutual funds that you can choose to invest in.

That means that the rate of return for the mutual funds you can invest in through an IRA could likely be higher than those offered by your company retirement plan. When choosing your funds to invest in, choose funds that have a good track record—that have performed well for at least the last 5 to 10 years (and longer is even better). I recommend dividing your contributions equally between large cap, mid cap, small cap, and international mutual fund investment accounts.

If you want to know how we choose the investment accounts that we are personally invested in for our Roth IRA, fill out the information below, and I’m happy to send you the information. (There are no strings attached, and I don’t make any commission or anything if you follow this information; it’s just the kind of information that I really wish I would have known before we started investing for retirement more than 15 years ago.)

For more information about the differences between a traditional IRA and a Roth IRA, read this article.

Day 31 Challenge: If you are currently contributing at least up to the employer match in your comparny retirement plan, strongly consider opening a Roth (or traditional) IRA so that you will have more investing options for retirement. If you are not yet contributing up to the company match, work steadily toward that goal, and make a plan to open a Roth (or traditional) IRA once you can contribute more than the company match to your 401(k) or similar plan .

 

Conclusion

The information above really will help you know how to achieve financial freedom—if you follow it. 🙂 In as little as 30 minutes each day for a month, you can do so many things that could help you to earn more, spend less, save more, and invest more money—the possibilities are endless! You can start to change your financial future today—right now—by making small steps to work toward financial security and to build wealth over time.

Join the new Families for Financial Freedom community Facebook group to receive encouragement and ideas for how to manage your money and reach your financial goals and dreams.

 

What are your best tips for how to achieve financial freedom? What steps are you taking now to reach that awesome goal? Leave a comment below and let me know—I would love to know your ideas!

 

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

Join Our Facebook Group!

Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

What Is Financial Freedom? 7 Simple Steps to Financial Freedom!

what is financial freedom

 

What Is Financial Freedom?

Financial freedom can be defined in many ways, but I believe that financial freedom is being able to do what you want to do when you want to do it without having to worry about how to pay for it.

I think that is the ultimate definition of financial freedom, but there are other important elements of financial freedom, as well. Below I will give several more practical answers to the question, what is financial freedom?

 

Tip: Pin the image above so that you can easily refer to this article about what is financial freedom later!

 

 

7 Simple Ways to Answer the Question “What Is Financial Freedom?”

In addition to the answer above, there are several other helpful answers to the question of what is financial freedom. Here are my top 7.

You could also look at these as simple steps to financial freedom. Put another way, you could look at these 7 steps as a financial freedom plan or a financial freedom formula for success.

 

1. Financial freedom is freedom from credit card debt.

The first answer for what is financial freedom is that it is freedom from credit card debt.

If you have ever felt trapped by credit card debt or other obscenely high interest rate debt, then you know why I list this definition next. If you do not pay off your credit card balance every month, then you yourself are ensnared to an extent by this merciless captor.

If you have gotten into a financial bind where you feel dependent on credit cards, know that there is a way to get out and there is a better way to live! Find out how to stop relying on credit cards. Also learn how to save up to pay for large purchases with cash to end the debt cycle forever! Free yourself from bondage!

 

2. Financial freedom means having an emergency fund.

An adequate emergency fund is a crucial part of financial freedom because you need an emergency stash to be able to pay for life’s unexpected (but inevitable) financial troubles.

Most families will have a major financial setback of $10,000 or more in a 10-year period, and if you don’t have the cash and you continue to rack up debt, then that emergency becomes debt that adds up to tie up all of your money.

Having an adequate emergency fund of at least three months (but I think six months is even better and recommend that amount) is crucial to your family’s financial well-being and their financial peace.

Learn how to create a starter emergency fund of at least $1,000, and learn how to build a full emergency fund as quickly as possible.

 

3. Financial freedom is freedom from all nonmortgage debt.

Another facet of being financially free is to be out of all debt except for the mortgage. In our credit-loving society, this is an amazing feat in and of itself; it really is!

If you have had tens of thousands of dollars of debt, rest assured that your situtaion is not unique. Many people have been in the same circumstances, including yours truly. The $60,000 of debt that we had before we bought our first home was one of the main impetuses that set me on a quest to learn all I could about personal finance.

You can get unburied from all that debt, just like we did. It probably will not be easy, but it will be simple—and I promise that it will be worth it! Being consuming debt free feels amazing once you get there!

Learn how you can get out of debt (and stay out of debt)! Yes, you can even avoid car loans by saving up to pay for your vehicles with cash. Learn how to never have a car payment again!

 

Check out these related articles:

Learn How to Get (and Stay!) Out of Debt!

How to Stop Relying on Credit Cards

How to Use Sinking Funds to Build Your Savings and Avoid Debt

 

 

4. Financial freedom means not living paycheck to paycheck.

Just like having lots of credit card and other consumer debt, living paycheck to paycheck is a scary way to live. Being broke all the time is no fun!

One very important and powerful level of financial freedom (and financial peace) is not having to constantly worry about how you will pay your bills or put food on the table.

If you are always running out of money and constantly living paycheck to paycheck, look at ways to reduce your spending. You may also need to honestly differentiate between needs and wants. And also consider ways that you can increase your income!

There is only so much you can do to spend less money (but there is a lot that you can do!), but your potential for increasing your income is virtually limitless. One way to make more money that can be a lot of fun is to start a side hustle. Find 19 awesome side hustles that you can do from home. And learn 11 simple steps to start a successful side hustle.

If you are tired of living paycheck to paycheck, read this article with simple steps to stop living paycheck to paycheck for good!

 

5. Financial freedom means paying off the mortgage and becoming completely debt free!

The day that we paid off our mortgage was honestly one of the best days of my life! After going through a time when I was seriously afraid (as in, often had knots in my stomach and sometimes found it difficult to sleep at night) that we would never be able to get out of all of the debt that we had, becoming completely debt free was something I looked forward to like a freshman looks forward to graduation. 🙂 (Actually, maybe even more than that!)

We had been working very diligently toward that goal ever since we learned about Dave Ramsey and this whole crazy part of society that seeks for and then lives debt free (what an amazing concept!), and when it finally happened and we became debt free ourselves, it was amazing! It was life changing! And we plan to never go back! #debtfreeforlife #100percentdownplan

By following the financial principles that I teach on this website, we were able to pay off our home (on one income!) in less than 6 years! Learn 7 simple steps to take to pay off your mortgage early!

 

6. Financial freedom means being able to retire and work only if you want to!

According to one oft-quoted study, close to 70 percent of employees are either unengaged or actively disengaged at work. That is really sad to me. I am fortunate enough to have a full-time job (as an editor) that I love (most of the time :)).

And yet I still look forward to the day that we have enough money that I can choose to stop working and can spend more time with my children or volunteer more in the community or pursue other interests or a different line of work that may not pay well.

In order to retire with comfort and dignity, you have to save a significant amount of money. And because of the amazing power of compound interest, the sooner you start to invest for retirement, the better.

Are you ready to get serious about investing for retirement so that you can have an awesome financial future? Join the 5-day Invest Your Money, Change Your Life challenge to learn how to invest, the kinds of investments that I recommend, the amount that I recommend you invest, how we choose the mutual funds we invest in, and more! Sign up now! 

 

7. Financial freedom means being able to afford whatever you want to whenever you want to. 

Now we are back to my first, and I believe the ultimate, way to answer the question of what is financial freedom.

Very few people will ever have the money to do 100% of whatever they want whenever they want, but by investing a good amount (at least 10 percent but preferably 15 percent of your income) early and continually, you will by the time you retire be able to do much or even most of what you want when you want.

How Do You Achieve Financial Freedom?

I truly believe that there are more ways to reach financial freedom today than there have probably ever been before. You can invest for retirement in a 401(k), as many traditional employees do to help you work toward financial independence. You can also start your own business (like starting a money-making blog! :)) to help you reach financial freedom. And you can do a side hustle (side job) as a way to augment your income and achieve financial freedom. And you can find streams of passive income to help you achieve financial freedom, as well.

 

What Does Financial Freedom Look Like?

As we learned above, financial freedom can look like different things to different people. To me, one meaning of financial freedom is to be able to pay all of your bills. Another is to be debt free. Another level of financial freedom is to have enough in savings and investments that you could quit your job for a time if you wanted to or needed to. And ultimate financial freedom to me is to be able to work only if and when you want to, for an indefinite amount of time and for the rest of your life if you chose to. Being able to retire early is a great measure of financial freedom for many people (and for me!).

In another sense, financial freedom may look like a big house and nice cars. It may look like a beach house or vacation home. It may look like being able to take vacations to exotic places whenever you want. It could look like being able to buy the car of your dreams or the boat of your dreams or the motorcycle of your dreams without debt and without the niggling feeling in the back of your mind that you probably cannot really afford this particular luxury.

Or it could look like being able to give very generously to the causes that you love. It could look like starting a nonprofit organization. It could look like helping to build schools in developing countries. It could look like building a wing of a hospital or donating generously to an orphanage or retirement home.

Financial freedom looks different to everyone, but financial freedom could mean being able to afford to go after your hopes and dreams and make them a reality.

 

How Important Is Financial Freedom?

To me, financial freedom is very important (of course!). Financial freedom in the sense of debt freedom is a must for us, a chosen way of life. We do not want to be slaves to lenders ever again. We do not want the added stress and financial obligation of interest payments ever again. We do not want the worry of someone else being able to repossess our vehicles or home or anything else ever again.

And the ultimate financial freedom of being able to retire early is definitely something that we are hoping for and working toward.

Financial freedom means security. Financial freedom means peace. Financial freedom means flexibility. Financial freedom means opportunities.

Financial freedom means options. And options are a beautiful thing.

 

How Much Money Do You Need for Financial Freedom?

If you have asked yourself, How much money do I need for financial freedom? then you are asking the right kinds of questions to be able to get there someday.

There is no set amount of money. For many people for many years, $1 million has been a sign of reaching an important financial milestone. And depending on how much longer you have to live and the kind of lifestyle you want to live and how you invest the money, $1 million may be enough to give you financial freedom.

For even more financial security and a higher likelihood of sustained financial freedom, having $2 million or more in investments and cash would be a great goal to shoot for.

Conclusion

What is financial freedom to you? To me, financial freedom is financial peace. And financial freedom is being able to work doing something that I love only when I want to (or not at all, if I don’t want to).

Since we live on my one good but average income, with my husband as our stay at home parent, that level of financial freedom may take several (or many) more years, but I do believe we will get there as we follow the financial principles that I teach on this blog.

And if you follow them, I wholeheartedly believe that you will get there, as well! Best wishes to you as you pursue your own financial freedom!

 

How would you answer the question,what is financial freedom? And where are you on the path to financial freedom? I would love to hear your thoughts and cheer you on! Leave a comment below and let me know!

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

Join Our Facebook Group!

Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

How to Become a Millionaire in as Little as 20 Years—from Nothing!

how to become a millionaire with no money

How to Become a Millionaire with No Money

In this article I am going to explain how to become a millionaire with no money! Read the simple steps below to learn how!

A million dollars is a magic number for a lot of people. And even though a million dollars is not what it was 50 years ago, $1 million is still enough to allow you to retire in comfort if you manage your money well. Find 9 simple tips to be smart with your money here.

You can become a millionaire in as little as 20 years by following the simple steps outlined below—it’s not as hard as you think!

 

How to Become a Millionaire with No Money: 7 Simple Steps!

Are you looking to make $1 million? Though $1 million isn’t what it used to be, having a million dollar net worth will still allow you to live a comfortable and very enjoyable retirement.

How can you become a millionaire fairly easily in just 20 years? It won’t be as hard as you think! The answer is compound interest. Albert Einstein called compound interest the eighth wonder of the world. You can learn more about the amazing power of compound interest here.

Read on to learn how you can use compound interest to become a millionaire even when you have no money—in just 20 years!

 

Tip: Pin the image above to Pinterest so that you can easily refer to this article on how to become a millionaire with no money in just 20 years later!

 

 

Become a Millionaire When You Have No Money—in Just 20 Years!

If you want to become a millionaire in just 20 years, you probably think you have to have a huge income and be able to save thousands of dollars a month. But the awesome truth is that you don’t! You can have a good but ordinary household income and still become millionaires in just 20 years!

 

How Much Do You Need?

In order to become millionaires in just 20 years, you do need to invest a significant amount of money—but not a huge amount of money. If you and your spouse will each invest just $500 a month, for $1,000 a month total, and you will do that for 20 years, then you can reach this goal!

And all that that requires is that you each max out your Roth IRA or traditional IRA each year. (The max contribution for an IRA or Roth IRA in 2019 is $6,000, or $500 a month.) Easy! Or, at least relatively easy, anyway, given the amazing reward that you get if you do it. 🙂 Can you imagine being a millionaire in just 20 years by saving just $1,000 a month? Difficult? Yes. But doable if you really want it? Definitely!

Learn simple changes you can make to your finances to be able to fully fund your Roth IRA or traditional IRA each year.

 

How Can You Get to $1 Million in 20 Years?

If you invest your combined $1,000 a month and receive an average annual rate of return of 12 percent, which is definitely possible if you invest for the long term in good growth stock mutual funds, your investments would have an estimated value of about $970,000.

Keep contributing your $1,000 a month and letting the money grow, and in just 3 more months you would have an estimated $1,000,904! So in just 20 years and a few months, you would have over $1,000,000! And that doesn’t even include any other investments you might have acquired over the years such as your home or other real estate, business net worth, and so forth.

So you definitely can become a millionaire in 20 years starting with no money by investing just $1,000 a month! Becoming a millionaire is a great goal to help ensure you reach financial freedom later in life!

 

Do You Want to Make That $1 Million Go Even Farther?

Are you investing yet in a Roth IRA or Roth 401(k)? If you make those monthly contributions into a Roth 401(k) or Roth IRA, then all of that money will be tax free when you withdraw it too! That means no paying Uncle Sam again in retirement. Woo hoo! Learn how you can fully fund your Roth IRA or traditional IRA each year.

Note: Are you new to investing and want to know how to start saving for retirement? Do you want to know, generally, what kinds of retirement plans to invest in, how much to invest, what types of investments I would recommend for retirement, and more? Then check out this article with 5 simple steps to start investing for retirement.

 

Check out these related articles:

 

How to Invest Your $1,000 a Month to Become a Millionaire from Nothing

If you have a company 401(k) or other retirement plan where you receive a match, take advantage of it, and invest at least enough money to receive the full match in your company plan.

If you don’t receive a company match, then you will probably be better off investing in a Roth IRA than investing in your company 401(k) because you will generally have many more options in an IRA. (And with many more options you are likely to find mutual funds that offer a track record of better long-term rates of return.)

To help you adequately diversify your retirement account, I recommend spreading your investing equally among four categories: large cap (large company), mid cap (mid-sized company), small cap (small company), and international mutual funds.

We have investment accounts through both Schwab and Vanguard, and they are both good brokerage companies. My Roth IRA is with Schwab, and personally I prefer them over Vanguard. Fidelity is another good option.

To find out how we choose the mutual funds that we invest in, fill out the information below, and I’d be happy to send you the information. No strings attached, and I don’t sell anything related to stocks or make any money off of sending you this information. It’s just the kind of thing I really wish I would have known almost 15 years ago when we started investing for retirement.

Ways to Save $1,000 a Month to Become a Millionaire Starting with No Money

In order to find $1,000 a month in your budget, see if you can reduce your spending or save more money in one or more of the following areas.

1. Cut back on eating out to help you become a millionaire starting with no money.

The average American family spends about $3,000 a year on eating out. Even though you’ll have to replace some of that cost with the cost of buying groceries to eat at home, the savings here can be amazing. 

For more than 10 years we’ve spent less than $300 a year on eating out for our family, and even though that may seem extreme to some, I know that that has been part of the reason that we’ve been able to reach other financial goals that we’ve set even though we have a single, average income. Read this article to learn how we save money eating out (when we do eat out :)).

2. Slash your grocery budget.

The grocery budget is one of the areas where most people can save a lot of money if they choose to because there are so many options involved and because the difference between what is expensive and what is cheap is so drastic sometimes.

For example, the local discount store where we buy most of our groceries regularly sells frozen boneless skinless chicken breasts for $1 a pound. And yet you can also easily spend $5 to $10 a pound or more on expensive cuts of meat. The same goes for produce in season versus produce that is not in season. People spend a lot of money (a lot of money) on junk food and soda and alcohol and other nonessential items; that’s another area where you can likely trim substantially.

To learn how to save money on your grocery shopping, read this article with more than 70 tips for slashing your grocery spending.

 

Grocery Price Comparison Cheat Sheet

One of the best ways that you can slash your grocery budget is to use a grocery price comparison cheat sheet. With a grocery price comparison cheat sheet you have at your fingertips the information you need to spot great deals and pass over grocery items that are overpriced. Sign up for this free, super handy cheat sheet below!

 

Plan Your Meals

Another important way to save a ton of money on groceries is to meal plan. Get this free weekly meal planning worksheet (sign up below) to get organized and easily plan your week’s worth of meals! The meal planner comes with helpful meal planning tips that will help you make the most of your grocery shopping budget!

 

Read this article for more than 70 suggestions for how to slash your grocery bill without needing to use coupons!

 

3. Cut your entertainment spending and invest the money toward becoming a millionaire.

Another area where you can reduce your spending is with entertainment. Fortunately, there are tons of ways that you can save money on entertainment.

 

Find Free and Cheap Activities to Enjoy as a Family 

First, find things to do with your spouse or family that are free or cheap. There are so many fun activities that you can do for little or no money that reducing spending in this area really isn’t very hard. Check out this huge list of over 90 free activities you can do with your family.

 

Cut Your Cable or Satellite Bill

There are a lot of free or cheaper alternatives to cable and satellite, so try pulling the plug on these services and banking the savings. The average cost of paid TV in the U.S. is close to $70 a month, so if you will cut your cable or satellite and invest the money each month instead, you will be one-third of the way to saving your $200 a month to become a millionaire right there!

With digital TV through a standard antenna, there are many channels available just on your regular TV—for free. If you haven’t checked them out for a long time, you should. And if you can be a little patient, the library also carries many of the programs and movies you regularly watch, for free. But if neither of those options works for you, you can try Netflix, Hulu, Sling, or other similar options

 

Slash Your Cell Phone Bill

Also, as part of saving money on your entertainment, don’t forget to take a look at the money you spend monthly for your cell phone plan. The average family in the U.S. spends over $1,000 a year (about $90 a month) on their cell phone bill. And I know a family that spends (or used to spend—I really hope that it is used to spend) $500 a month on their smartphone plans!

You can save a considerable amount if you’re willing to reduce the amount of data you use (or research new data plans with your carrier in case prices have dropped) or switch carriers.

Since September 2018, we’ve been using Xfinity Mobile for our cell phone carrier! If you’re in an area with Xfinity high-speed internet and mobile, you’ve got to check them out! We’re paying an introductory price of $40 per month for our internet (same price as the much slower internet that we used to have from a different provider; it is then set to go to $65 a month, but you can bet we’re going to try to negotiate that down!), and the cell phone plan is virtually free.

Since we’re such light data users (especially given the fact that Xfinity Mobile has free hotspots it seems almost everywhere!), we pay only $3.16 a month for taxes and fees for each smartphone line. (That’s the price if you use less than 100 MB of data per month, which we do; then it’s $12 per GB per month after that, or $45 per month for unlimited.) It’s such an awesome deal!

And Xfinity Mobile has the same coverage as Verizon, which reportedly has the best cell phone coverage in the U.S. You do need to sign up for Xfinity internet in order to use Xfinity Mobile, at least initially. You can then drop the internet service if you want, but then you’ll pay an extra $10 per month per line for the mobile service. Interested in learning more or signing up? Use this referral code to save up to $100 when you sign up: 1RQ4SP 

Don’t have Xfinity in your area? Before Xfinity we were with Republic Wireless for over two years. They were a great company, and they are so much cheaper than having service with one of the Big Four cell phone carriers. I spent about $13 a month for my smartphone data plan. Isn’t that amazing? Check out their website to learn about their plans and pricing, and start saving today!

If you use more that 1 or 2 GBs of data, also consider Mint Mobile, which offers plans starting with 2 GB of 4G data and then unlimited LTE data for just $15 per month. That’s an incredible deal. Visit their website to learn more.

Also find ways you can save money on your current cell phone plan with these ideas to slash your cell phone bill here.

 

Save Money on Vacation

Another area where you can save a lot of money on entertainment is with your family vacations.

 

Do Family Staycations!

To save money when vacationing, try going on a staycation, where you vacation at or near your home. No matter where you live, you can still find tons of fun things to do in your own backyard! Chances are there are tons of things that travelers come to your area to do that you have never do—so check them out! 

Read this article to find more than 50 awesome ideas for things to do during a staycation!

 

Save Money through Services Like Airbnb and VRBO.com

You can also save money by staying at people’s homes through Airbnb and by staying in hostels. And by camping.

We’ve been staying at places through Airbnb for the last couple of years, and it’s been great. It’s how we’ve done most of our vacationing during that time—even more than camping. I love using Airbnb because the hosts are wonderful and the price is awesome. And so are the amenities (my favorite places are those with pools and hot tubs :)). Read five awesome ways that you can save money by using Airbnb here.

Sign up now for an Airbnb account and receive $40 to use toward your first stay. Pretty sweet 

 

Save Even More Money on Family Vacations

Save even more money on vacations by choosing many fun and inexpensive (or even free!) things to do while you vacation, using discount websites, traveling in the off or shoulder season if you can, comparing prices when you bundle services like airfare and hotel, and more!

You can find many more ideas for ways to save money on your family vacations here.

Read this article for even more ideas on how you can spend less on entertainment in various areas to help you become a millionaire.

 

Check out these related articles:

4. Save money on transportation.

Another area where families can save a ton of money is on their transportation costs.

 

Get Rid of Your Car Payments to Really Make Progress toward Becoming a Millionaire

One of the best things you can do to build wealth is to get rid of your car payments (and all debt payments).

The best make and model of car to own is the one that doesn’t have a car loan. 🙂

If you have car payments on a vehicle and it’s squeezing your budget and you can’t increase your income soon, you should look at selling it. Especially if you won’t likely be able to pay off the car in the next 18 to 24 months at the most, I would strongly encourage you to sell the vehicle.

Even if that means selling the car at a little bit of a loss (when you’re upside down on it) and taking out a small loan for the difference if needed, I would recommend you do it. And then sell some stuff or work extra or even borrow a little extra money from your credit union or local small bank to be able to buy a $1,000 to $3,000 car that you can get around in for a while till you can save up money to buy a more expensive vehicle with cash.

Because having $3,000 to $5,000 of debt on a personal loan and inexpensive car is a better option than keeping a large debt and having to make large monthly payments on your current automobile. And then you can save up and buy a nice vehicle you can afford—with cash! Learn how to buy a (nice) car with cash here.

If you will commit to buy cars with cash from now on and invest some of the money you were spending on car payments in your own awesome financial future instead, you will be well on your way to becoming a millionaire. Let’s work on building your wealth instead of the bank’s, shall we? 🙂

Upside down on your car? Learn how to turn things around and get out of an upside down car payment.

Learn how to get (and stay!) out of debt here.

 

Try These Other Ways to Save Money on Transportation

You can also save money on transportation by driving less through carpooling or biking or telecommuting, saving money on gas with apps like GasBuddy, saving money on car maintenance and car repairs, driving the speed limit :), finding cheaper auto insurance or saving money on your current auto insurance by taking advantage of discounts, and more. Find more than 30 ideas on how to save money on transportation here.

 

More money-saving tips: Do you want even more ideas on how to reduce your spending in order to find your $200 a month to invest? You can find ways to save money on housing, save money on utilities, and save money on clothing.

Also read this article that has more than 20 ideas for ways to reduce your spending in nearly every budget category.

 

5. Increase your income to help you become a millionaire.

Even though I spend a lot of time teaching people how to spend less money, and I honestly feel that learning to control your spending is the more important of the two factors when it comes to gaining financial stability and building wealth, I feel that earning more income has the greatest potential impact. And let’s be honest—it’s just more interesting and more fun. Because there are only so many things that you can do to reduce your spending (but check out this article to learn more than 20 ways to reduce your spending), but the opportunities to increase your income are nearly limitless!

Here are some simple ideas for things you can do to make more money starting today:

  • Work overtime. If you have the opportunity to do so, working overtime is a great way to help you to save money quickly.
  • Ask for a raise or promotion. If it’s been a few years since you received a significant raise and you’ve been an exceptional employee at work, make a list of your contributions and your accomplishments, and schedule a meeting with your boss to request a raise or a promotion. Focus on ways that you’ve earned the company money or saved them money. If you learn that a raise or promotion isn’t going to happen right away, ask what specific steps you can take in the next year or two to make it a reality. Read this article for more information on how to seek a raise or promotion.
  • Do freelance work. If you work in a field that lends itself to doing freelance work, take advantage of that opportunity to earn extra income to help you save money fast! I have been doing freelance writing and editing since before I graduated from college with my English degree and editing minor, and doing freelance work has not only helped me gain experience in other areas besides what I do for my full-time job but has also at times (when I wanted to give the time to it) brought in significant additional income.
  • Do coaching or consulting. Similarly, if you have job experience or a skill that lends itself to coaching or consulting, put that skill to use! Popular areas for consulting include human resource (HR) consultant, public relations (PR) consultant, marketing consultant, business management consultant, and accounting consultant. Popular areas for coaching include financial coaching, job coaching, personal fitness coaching, and leadership coaching. Look for opportunities on indeed.com or your favorite job website.
  • Get a (second) job. If one spouse is available to get a second job in the evenings or on Saturday, for example, then this is another great potential way to earn additional income. And if you are a one-income family, or if one of you works only part-time, you might want to consider reentering the workforce or going full-time temporarily in order to save money more quickly.
  • Start a side hustle. If you would rather earn money without working another regular job, there are a lot of things you can do to earn a little extra income with a side hustle. Some ideas include starting your own small business where you turn a hobby into a money-maker, being a virtual assistant, or driving for Uber or Lyft. Learn how to start a side hustle and find out about many side hustles that you can explore.
  • Start a money-making blog. The potential for significant income is one of the reasons that I started this blog. If you love helping people and enjoy writing, being a blogger might be a great fit for you. In addition to great income potential (check out these amazing income reports of bloggers who make $10,000 to $100,000 or more per month!), there are many other benefits of being a blogger, such as being able to be your own boss and work on your own schedule. Learn how to start a blog for less than $5 a month.
  • Earn passive income. Some options for earning passive income are to create a product you have someone sell, write a book, create a money-making podcast or vlog, develop an online course, or participate in affiliate marketing. Read this article to learn more ideas for earning passive income.
  • Use rebate apps like Ibotta and Ebates. With rebate services such as Ebates and Ibotta, you can earn money by shopping for things and at places where you would shop anyway. With Ebates, you generally buy items through their website to save up to 40 percent on purchases. It is primarily an online service. Ibotta, on the other hand, is an app you use primarily after you make purchases at brick-and-mortar stores. Because of this, you can actually sign up for and use both apps to save on purchases. Sign up for a free Ebates account here, and sign up for a free Ibotta account here. You can literally sign up for both in just seconds and let the savings start stacking up.
  • Sell stuff on eBay or Amazon. If you have a good eye for a bargain, you can buy items at thrift stores or garage sales and sell them for a profit on eBayAmazonCraigslist, or your local online classifieds.
  • Sell your clothes to consignment shops. If you’re like most people, you probably have more clothes than you need. So use them to bring in some quick cash!
  • Have a garage sale. Declutter and earn money, all at the same time!

You can find even more ideas for increasing your income in this article.

And learn about side hustles you can do from home here.

 If you are ready to earn more money (and who isn’t?!), then sign up for my free 10-day Earn More Money, Change Your Life challenge below.

6. Automate your investing.

Automating your investing will help ensure you become a millionaire even starting with no money. This is so important! So just do it! 🙂

If you have a 401(k), make sure you have a percentage of your income at least equal to the company match automatically withdrawn from the paycheck and invest in your 401(k). If you don’t have a 401(k) available, then open and set up automatic investing for your IRA through a brokerage company such as Schwab.

When you automate your finances it not only saves time but makes life much simpler—and it helps you stick to your financial goals!

To learn more about how to automate your finances to simplify your life, get out of debt, begin to save, and start to build wealth, I recommend The Automatic Millionaire by David Bach. It’s one of my favorite personal finance books because it gives simple, actionable steps you can follow.

Learn how to automate your finances to build wealth.

 

 

7. Track your progress as you work toward your goal of becoming a millionaire, even with no previous money.

Even if you have no money saved yet, you can still become a millionaire in just 20 years by following the recommendations above! And tracking your progress is a great way to help ensure that you reach that goal.

Tracking your progress will help you see that reaching your goal really is possible, it will help you stay motivated, and it will allow you to make course corrections if and when you need to.

One important way to track your money is to do a monthly budget or spending plan. Another important task is to monitor your progress as you work to get out of debt. And especially once you are out of nonmortgage debt, another is to periodically review your net worth, including reviewing your retirement and other investment account balances.

 

 

Want a Great (Free!) Way to Track Your Financial Progress?

Check out the free app Personal Capital, which allows you to track how your investments as well as checking and savings accounts are doing and also view your account history to see how your accounts and overall portfolio have done over time. It’s a great tool! Sign up for your free Personal Capital account here.

 

Final Thoughs on How to Become a Millionaire with No Money!

If you are looking for how to become a millionaire with no money, the tips in this article will help you to accomplish that awesome goal! Becoming a millionaire in 20 years, even with an ordinary income and even when you currently have no money invested, definitely is possible!

To learn more about how to become a millionaire by investing for retirement, read this article.

 

What are your best tips for how to become a millionaire with no money? What questions do you have about how to become a millionaire in just 20 years starting from scratch? Leave a comment below and let me know your  questions and thoughts!

 

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

Join Our Facebook Group!

Join our new, closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

How Much Do I Need to Retire?

how much do I need to retire?

How Much Do I Need to Retire?

In this article I am going to answer this question: How much do I need to retire?

 

Tip: Pin the image above so that you can easily refer to this article about how much do I need to retire later.

 

Different Views on the Question of How Much Do I Need to Retire

Financial experts vary a little on how much they recommend individuals save toward retirement, but most of them recommend saving either 10 or 15 percent (or somewhere between the two, such as 12 percent—roughly one hour’s worth of pay per day) of your income for retirement.

So if you make $40,000 per year, or about $3,333 per month, you should save between $333 and $500 per month.

My personal recommendation is that, as soon as you can, you should start saving 15 percent toward retirement to help ensure that you retire with dignity and in comfort. Because of the wonderful power of compound interest, the money you save now is the most powerful! So let’s say you reduce your spending in various areas so that you are able to invest 15 percent of your gross income in good mutual funds that earn you a realistic 11 percent average annual rate of return, and you do that (never contributing any more than that, even, when you get raises) for your 35-year career.

By the time you retire, you would have $2,274,985 in your retirement account. That’s pretty impressive in and of itself! And if you have invested all of that money in a Roth 401(k) or IRA, then it will all be tax free in retirement. Woo hoo!

Note: If you are interested in retiring early, you may want to save 20 percent or more of your income. Learn more about the feasibility and benefits of FIRE (financial independence, retiring early).

But before you start saving for retirement, I recommend that you pay off all of your nonmortgage debt and save up a three- to six-month emergency fund. This will ensure you have a firm financial foundation to begin building wealth (which is what you’re doing when you start investing for retirement—yay!).

 

Check out these related articles:

How to Become a Millionaire by Investing Just $200 a Month!
401(k) or IRA—Which Is Better?
How Can I Save Enough Money for Retirement?Roth or Traditional IRA—Which Is Better?

 

A Great, Free Investment App

Once you begin investing for retirement, you may want to look into a great free app called Personal Capital in order to track your progress toward reaching your retirement and other financial goals. With Personal Capital, you can see not only all of your bank checking and savings accounts and even your credit cards and other finance accounts, but you can also link your retirement and regular nonretirement brokerage accounts.

This allows you to have a complete, overall picture of your current financial situation. And you can also view your account history to see how your accounts and overall portfolio have done over time. It’s a very helpful tool that I use often! Sign up for your free Personal Capital account here.

 

What Should I Invest in for Retirement?

There are many ways that you can invest, such as buying stocks, buying real estate, and buying a business, but by far the easiest and least risky way to invest of these options is to invest in mutual funds.

A mutual fund is a collection of assets like cash, money market accounts, stocks, and bonds that is professionally managed as a portfolio of investments. And mutual funds are made up of shares that represent owning a piece of a business. Each piece is a known as a stock. By owning a stock, you own a piece of a company such as a technology company, automobile company, or food company. For example, you can buy a share of a mutual fund that invests in Coca-Cola and Walmart and Ford.

When comparing cash, money market accounts (a high-yield, high-minimum deposit savings account), bonds (where a company or municipality owes you money—you’re buying their debt and they pay you back with interest), and stocks, long-term, the asset that will make the most money are stocks because they have more inherent risk than the other three options and therefore higher potential reward.

However, you don’t need to worry that mutual funds are overly risky—if they were, I definitely wouldn’t invest in them, and I wouldn’t recommend that you do, either! By investing in mutual funds, you actually reduce your amount of risk because you are investing in a wide variety of different companies, rather than buying stocks from a single company (that could go bankrupt, for example).

 

What to Invest In

I know that when I was first trying to figure out how to start investing for retirement I really wished there was someone who had my best interests at heart (and not their commission rate) who would just hold my hand and show me the best funds to invest in and why. And that’s why I will email you and share with you exactly how we choose the mutual funds we invest in (for free—no strings attached) by entering your email address below.

Should I Invest in a Traditional or a Roth 401(k) or IRA?

For many people, a Roth 401(k), if available, or a Roth IRA is a better option than a traditional 401(k) or IRA because they will have a larger income in retirement than in their working years.

And that’s what most people should strive for—to accumulate a substantial amount of wealth in order to retire with dignity and provide for themselves comfortably during retirement. And it’s a worthwhile goal to aim for because having a substantial nest egg gives you more options—more options to travel, more options to care for elderly parents or children, more options to give significant amounts to worthy causes.

A Roth 401(k) or IRA is also often a better option than their traditional counterparts for many people who have significant tax deductions now for things such as child tax credits, charitable giving deductions, or mortgage interest deductions, for example. This is because those tax-deductible items help make their taxable income lower now than it likely will be in retirement.

Learn more about investing for retirement to help you unlock the powerful potential of your future.

Conclusion

By saving at least 10 percent of your income, and better yet 15 percent, you help to ensure that you will be able to retire in comfort, where you can provide for your needs as well as many of your wants in your post-working years. By saving more money as soon as you can, you will have much more (because of the awesome power of compound interest) money available to travel, take care of your medical needs, spoil grandchildren and help pay for their college educations, give to causes you care deeply about, and more.

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

Join Our Facebook Group!

Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

How to Start Investing for Retirement: 5 Simple Steps

how to start investing--5 simple steps

How to Start Investing for Retirement

In this article I am going to share 5 simple steps for how to start investing for retirement.

 

Tip: Pin the image above so that you can easily refer to this article on how to start investing for retirement later!

How do I start investing for retirement?

I know that when you are first thinking about how to start investing for retirement it can feel really overwhelming. There are a lot of options, and it can be difficult to know the best way to go about it. But never fear—I’m going to walk you through 5 simple steps for how to start investing today so that you will feel confident in investing for your future.

 

Check out these related articles:

How to Become a Millionaire by Investing Just $200 a Month
How to Retire Early: 11 Simple Steps to Make It Happen! 
401(k) or IRA—Which Is Better?
Roth or Traditional IRA—Which Is Better?

 

Why should I start investing for retirement?

But first, before I discuss the 5 steps on how to start investing for retirement, let’s start with a powerful motivator—why.

When you’re young, it’s often hard to worry about the future or spend too much time (or maybe any time) planning for the future, especially for the far-off future that is decades away—because the realities and concerns of the now feel much more pressing and because the future is such a big unknown.

But the truth is that you need to start investing now! And I’ll teach you an easy, low-risk way to do it below. So read on!

The reality is that virtually everyone needs to invest (as soon as possible) to have a comfortable retirement and be able to provide for themselves in old age without working until they die. That’s because investments (good investments, that is) can grow considerably over time, while the value of cash depreciates over time because of inflation.

The sooner you start investing, the longer your money can grow and the more wealth you can potentially build because of the amazing power of compound interest.

Compound interest, simply put, is where the interest you earn on your money itself earns interest. Albert Einstein is said to have called this phenomenon the eighth natural wonder of the world. Compound interest allows your money to grow exponentially over time.

So, for example, let’s say you are the parent of a high school student who was a go-getter and worked every summer and earned $3,000 each summer. And then your rock star daughter invested that $3,000 she earned each year in a Roth IRA where she earned an average 11 percent rate of return on the money she invested.

Let’s say that she then finished college and started a business at 22 and worked in a career that she loved for 45 years, but she never put anything more toward retirement. With only that initial $12,000 investment over those four years of summer jobs, she would retire with $1,547,573.59 in her Roth IRA account. And that’s if she never contributed another dime!

Now, I know that a million dollars isn’t what it used to be, and it won’t be worth in 45 years what it’s worth today, but the fact that you can earn that kind of money without having to physically work for it is simply awesome.

What should I invest in for retirement?

One of the important things to consider when determining how to start investing for retirement is what types of assets to invest in. There are many ways that you can invest, such as buying stocks, buying real estate, and buying a business, but by far the easiest and least risky way to invest of these options is to invest in mutual funds.

A mutual fund is a collection of assets that is professionally managed as a portfolio of investments. With a mutual fund you and many other people buy into the collection of assets, and so you “mutually fund” that portfolio of investments.

Mutual funds are made up of assets like cash, money market accounts, stocks, and bonds.

A money market account is a high-yield, high-minimum-deposit savings account.

A bond is where you buy the debt of a company or municipality, and they pay you back with interest.

A stock is where you buy a small piece of a publicly traded company, such as a technology company, automobile company, or food company. So, for example, you could buy a stock from Coca-Cola, Walmart, or Ford.

And stock mutual funds are mutual funds that are made up primarily of stocks.

When comparing cash, money market accounts, bonds, and stocks, long-term the asset that will make you the most money, based on past performance over many decades, are stocks. That is because they have more inherent risk than the other three options and therefore higher potential reward.

However, mutual funds really aren’t that risky because you are investing in a wide variety of different companies, rather than buying stocks from a single company (that could go bankrupt, for example). Buying single stocks is what is really the risky venture, but investing in mutual funds is fairly safe as long as you are willing to keep your money invested long term.

As one of my favorite financial experts says, you won’t get hurt on a roller coaster unless you jump off. I am a fairly risk averse person, but I am completely comfortable investing in mutual funds with good long-term (at least 10 years) track records, and you can be, too.


Check out these related articles:

How to Become a Millionaire by Investing Just $200 a Month
401(k) or IRA—Which Is Better?
Roth or Traditional IRA—Which Is Better?

 

5 simple steps for how to start investing for retirement

As you can see, there are a lot of options when it comes to investing for retirement. But the KISS (keep it simple, sweetie) principle applies with investing, just like it does with many other aspects of your finances. Here are five simple steps that you can follow to help you know how to start investing for retirement.

1. Create a budget so you’ll know how much you can save (and should be saving) for retirement.

The first thing you need to do when starting to invest for retirement is to determine how much you need to save toward that goal. And the way to do that is to create a budget (or evaluate the budget you have) so that you’ll know how much you should be saving.

Most financial experts recommend saving between 10 and 15 percent of your income toward retirement. I recommend that you invest the greater amount—that you start to invest 15 percent of your income for retirement as soon as you can. And if you do that over the course of a 30- to 40-year career, you should have a very comfortable retirement. (But check out this article to find out how you can retire much sooner than that! #retireearly)

2. Take advantage of your company’s retirement match.

If you work for a company that offers a 401(k) or Roth 401(k) and that will match your contributions to that plan, then save the amount up to the full match in your company’s retirement plan.

If your company doesn’t offer a match or you are self-employed, then you can save with a Roth IRA, at least until you max it out (at $5,500). (Unless you have a really high income; then you will likely have to invest in a traditional IRA—which you can then convert to a Roth IRA.)

The reason I recommend investing in an IRA rather than an unmatched 401(k) is that you generally have a lot more available mutual funds in the IRA, and so you should be able to earn a higher return than you could in your 401(k).

After you invest the $5,500 in your IRA and max it out, then invest the rest of the money you have budgeted for retirement, till you get to 15 percent, in a 401(k) or similar account if you can, even if your company doesn’t offer a match.

3. After reaching the company match, invest in a Roth IRA.

As mentioned just above, after you have invested enough in your company’s retirement plan to receive the full match, then invest the rest of your money budgeted for retirement in a Roth IRA. You can invest up to $5,500 in a Roth IRA (and an additional $5,500 in a spousal IRA!). We have been investing our money for our Roth IRA for years with a brokerage firm called Schwab, and they have been a great company. Vanguard is another great option.

Once you start investing for retirement, I recommend that you check out a great free app called Personal Capital in order to track your progress toward reaching your retirement and other financial goals. With Personal Capital, you can see not only all of your bank checking and savings accounts and even your credit cards and other finance accounts, but you can also link your retirement and regular nonretirement brokerage accounts.

This allows you to have a complete, overall picture of your current financial situation. And you can also view your account history to see how your accounts and overall portfolio have done over time. I love this very helpful tool and use it all the time! Sign up for your free Personal Capital account here.

 

Check out these related articles:
How to Become a Millionaire by Investing Just $200 a Month!
Roth or Traditional IRA—Which Is Better?
How to Save Enough Money to Fully Fund Your Roth IRA
How to Retire Early: 11 Simple Steps to Make It Happen! 

 

4. Determine where (which brokerage firm) to invest in for your Roth IRA.

Even though I heard the advice to open a Roth IRA within a few years of when I started to invest for retirement, I am sad to say that I didn’t actually open a Roth IRA until several years later. And then worse than that, I didn’t actually start funding it until a couple of years after that! Isn’t that crazy?

And the reason was that I didn’t know how to do it and opening a Roth IRA seemed daunting. It wasn’t until I finally realized how big a difference being able to choose your own mutual funds can have on the rate of return of your investments that I finally took the plunge to open a Roth IRA.

Note: It can make a big difference! if you invest $10,000 in a mutual fund for 10 years that gets an annual average rate of return of 12 percent versus one that gets an average rate of return of about 8 percent, you will actually earn during that time at least $10,000 more from the fund that earns 12 percent. So this is a big deal!

So I strongly recommend that you open a Roth IRA as soon as you can. And it takes only about 10 minutes! (Can you believe I procrastinated that long over a fear of learning how to do something that takes 10 minutes?!)

My husband and I have accounts at both Schwab and Vanguard, and both are good companies, but our preference is Schwab. (For one thing, you can generally start investing with Schwab with less money than with Vanguard.)

Note: I am not an affiliate with either brokerage firm nor am I associated in any way with either one (I do not get compensated in any way by either company if you open an investment account with them); they are just two good companies that you could choose to invest with.

Fill out the form below and I’ll email you a simple cheat sheet that will give you the exact steps to open a Schwab retirement account in 10 minutes or less. So let’s do this!

5. Determine which mutual funds to invest in in order to adequately diversify your retirement account.

When you begin investing for retirement, invest in good mutual funds (with good long-term track records) from four main categories: large-company stocks, mid-size company stocks, small-company stocks, and international stocks.

This will help ensure that you can benefit from the growth of all these different sectors and that you don’t lose all of your money when one of these sectors declines for a time. One of my favorite financial experts, Dave Ramsey, recommends a simple formula of investing 25 percent of your money for retirement in each of these areas. That’s what we have done for more than 10 years now, and it has worked well for us.

Would you like more guidance on how to start investing for retirement?

I know that when I was first trying to figure out how to start investing for retirement I really wished there was someone who had my best interests at heart (and not their commission rate) who would just hold my hand and show me the best funds to invest in and why.

And that’s why I will email you and share with you exactly how we choose the mutual funds we invest in (for free—no strings attached) by entering your email address below.

Conclusion

With these 5 simple steps on how to start investing for retirement, you will be able to start investing in order to save for your retirement and an awesome financial future!

Want even more help on investing? Learn 9 simple steps to become a millionaire by investing just $200 a month! And learn how to have enough money to fully fund your Roth IRA here.

 

What questions do you have on how to start investing for retirement? Or what advice do you have? I would love to hear your thoughts! Leave a comment below!

 

 

 

 

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