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How to Pay for College: 14 Essential Tips to Afford College without Student Loans!

how to pay for college

How to Pay for College

I know that the question of how to pay for college can be a daunting one. There is no denying that college can be expensive! For the 2017–18 school year, the average cost for tuition and fees at a public university for state residents was just shy of $10,000. And for a private university, the average annual cost was just shy of $35,000. That is no small chunk of change! Fortunately, there are many things you can do that will help you to pay for college for your children or for yourself. In this article I will share 14 important tips on how to pay for college.

 

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How to Pay for College: 14 Simple Steps to Help You Pay for College without Student Loans!

One of my proudest moments as a parent of a newborn was the day a couple of months after our first daughter was born that we opened her 529 college savings account. Though a college degree in and of itself is no guarantee of a better, higher-paying job or of job security, if you choose a field of study that teaches marketable skills and that leads to a career that pays well, the investment that you will make in your children’s education will be well worth it.

That is because even though earning a college degree doesn’t always result in a good job, there is a direct correlation between higher education and generally better-paying jobs.

Receiving a good education of some kind, whether that is through college or other job training, really is important in being able to provide a comfortable living for your family. And so even though saving for our three children’s college educations since they were a couple of months old has meant that we haven’t had as much money available for other expenses, the trade-off has been well worth it to us.

Our children may grow up largely in second-hand clothes (at least while they are young) and with mostly preowned toys, but our goal is that they will never know the stress nor feel the burden of student loans. (Or of any debt at all, for that matter—except for a reasonable mortgage.) Both my husband and I graduated with college degrees without any student loans, and that’s a legacy we intend to pass on to our children.

My husband and I were able to graduate without student loans by following many of the recommendations outlined below, and we didn’t even have college 529 savings plans or education savings accounts available to us. So if you follow the suggestions below, you’ll be that much farther ahead!

 

1. Start saving for college expenses when your children are young.

Perhaps the very best thing that can be of most benefit to you related to how to pay for college is to start saving for college as soon as possible.

Even though it may seem counterintuitive, one of the best ways to afford saving for your kids’ college is to start when they are young. I know that means that you will likely be fairly early in your career and won’t have as much disposable income as you should have later in life. But the earlier you start, the less you will have to save because of the amazing power of compound interest.

For example, if you start saving for your child right after he is born (which is what we did), then every $1 you invest could be worth about $8 by the time he or she begins college, and worth $10 or more when he or she is a junior in college.

That’s because of the rule of 72. If you are able to earn a 12 percent average annual rate of return, which is doable if you invest in good stock mutual funds, then the money you invest could essentially double every six years (on average). So after 6 years each dollar would be worth two, after 12 years each original dollar would be worth four, and after 18 years each original dollar would be worth eight. That is the power of compound interest.

As is the case for virtually all goals that you are trying to save or invest for, the sooner you begin, the better. Because saving for your kids’ college should (ideally) be a long-term goal, where you save for 10 or 15 years or more, the best way to save for your children’s college education is to invest in mutual funds. And the sooner you begin to invest, the longer your money will have to grow.

There’s a saying among personal finance experts that the best time to start investing was 20 years ago. And the next best time to start investing is today.

If you start saving $100 a month, for example, toward your child’s college expenses the month after they are born and are able to earn an average 11 percent rate of return until they go to school at age 18 (though you won’t need all of the money when they turn 18, of course), you would have $67,127 available for their college expenses. If you’ll choose a low-cost state college or university, you can pay for much (or perhaps all!) of your child’s tuition just by doing that.

Money from tax-advantaged savings account funds (which we’ll talk about in the next section) can be used to pay for tuition, fees, books, computer equipment, internet service, and even room and board.

2. Decide which savings tool is best to pay for college.

In order to take advantage of tax-free growth on the money you save for your children’s college, you can use one of three savings methods: a Coverdell education savings account, a 529 college savings plan, or a Roth IRA.

  • Coverdell Education Savings Account. A Coverdell education savings account (or ESA) is a college savings account where you can save a maximum of $2,000 per year per child. The advantage of the ESA is that you have complete control over the funds that you choose to invest in. And when you open the ESA through a brokerage company such as Schwab, you have literally thousands of mutual fund accounts to choose from.Though we started investing in our state’s 529 college savings plan (known to be one of the best in the country) shortly after our children were born, we have now switched to ESAs (through Schwab) for our children because of the greater flexibility (and thus greater potential for better rates of return) that they offer. Schwab offers low fees and has been a great brokerage company for us; it’s where we have our Roth IRA, ESA, and general (taxable) investment accounts.
  • The 529 College Savings Plan. If you are able to invest more than $2,000 a year into a college saving plan for each of your children, then the 529 plan might be the best option for you, if you want to keep things simple. The 529 college savings plans are administered by various states, but you don’t have to be a resident of the state whose college savings plan you choose to use. So, for example, you could use Utah’s college 529 plan (considered one of the best in the country), even though you live in New York. You can invest up to $14,000 per year per child without incurring the federal gift tax, or you can contribute a lump sum of $70,000 (or $140,000 for joint contributors), as long as you choose to spread the gift out evenly for the next five years. If you want the greater flexibility offered by an ESA but want to contribute more than $2,000 per year, one option is to put $2,000 in an ESA and then contribute the rest that you intend to invest in a 529 plan.
  • Roth IRA. If you are hesitant to invest money (or all of the money) for your children’s college savings in a dedicated education savings account because you’re afraid that they might not use all of the money that you invest in these plans or accounts and you don’t want to have to pay the 10 percent penalty to use the money if they don’t, then you can choose to invest instead in Roth IRAs for college savings, and the tax advantages are the same as investing in one of the two options mentioned above. However, the obvious disadvantage of this method of saving for college is that if you use the money for college, you won’t have it available to you for your own retirement expenses. But if you know that you will have ample money saved for retirement in other accounts, then this could be a good option for you. Or you could choose to save some of the money in an ESA or 529 and some in a Roth IRA.

Check out these related articles:

 

3. Decide how much you intend to contribute to save for your kids’ college.

In order to help you decide how much money to invest for your children’s education, an important factor to consider is how much of their college expenses you intend to cover. Some parents choose to pay 100 percent of their children’s college education, some choose to contribute 50 percent, and some contribute less.

Because we want our children to feel ownership of their education and because we hope that they will take their education more seriously if they feel some of the weight of having to pay for it, we’re intending to pay 50 percent of their college expenses. Or, rather, we’re intending to pay 50 percent of the average cost of tuition and fees for the state colleges in our state (though we will likely help some with housing and food and so forth as well). We hope that this will encourage our children to choose their school carefully and to not choose the most expensive college in the state.

If you can afford to pay for all of your children’s educational expenses and if they have already shown a great work ethic and other character traits you want them to have, then paying all of their college expenses may not be a bad idea. However, if paying all, most, or even half of your children’s college education will put your own financial security or retirement at risk, then you should look at contributing less or increasing your income or assets, or both.

 

4. Decide which mutual funds to invest in to help you pay for college.

As long as you have a timeframe of at least five years and you have a decent risk tolerance, you should invest in mutual funds when saving for your children’s college, in order to benefit from the greater growth that these funds historically provide (over bond funds and savings accounts and CDs, for example). If your child or children will be entering college in less than five years, then your best bet would be to use a regular savings account (or a money market account) or a CD.

But assuming you have at least five years before you will use the money, choose growth stock mutual funds that have been around for preferably 10 years or more and that have good track records. When deciding which mutual funds to invest in for your children’ ESA or 529, important factors to consider are the long-term rate of return, the expense ratio, the type of mutual fund (large cap, small cap, mid cap, and international), and the longevity of the current fund manager.

 


5. Make automatic monthly contributions to your children’s college savings funds.

The best way to ensure that you reach your goal of saving x amount for your kids’ college education is if you make automatic monthly contributions to your children’s ESA or 529 accounts. With the Schwab education savings accounts, for example, this is easy to set up.

Pro saving tip: Read this article for more information on how to automate your finances in order to save for your children’s college educations, invest for retirement, pay your bills, save for emergencies, and more.

 

6. Look for ways to increase your income to be able to save more money for your kids’ college educations.

If you want to be able to save more toward your children’s college educations, one of the best solutions might be to work on increasing your income. For more information on how to earn more money, sign up below for my free 10-day Earn More Money, Change Your Life challenge so you can start working on increasing your income today!

 

7. Expect your children to work during high school to help pay for their college.

Set the expectation that your children will work during high school during summer vacation and possibly after school as well to help pay for their college education. My dad owned his own company while I was growing up, and I worked in his office from the time I was a freshman in high school till I was a junior in college. I know that the opportunity to work in the various roles that I did taught me a lot about not only hard work but valuable skills such as communication and interpersonal skills as well, in addition to word processing and other office skills.

 

8. Lead your children to choose an affordable school.

One of the most important things you can do when saving for your kids’ college is to guide them in this very important decision of what school to choose. Even though most college freshmen are technically adults, they don’t have the experience or financial wisdom, generally speaking, to always make good decisions. They need your help, as their parents, to make wise and financially prudent decisions during this very important time of transition in their lives.

And because you are helping to foot the bill (or might be footing the entire bill) for their college education, you have the right—and the obligation—to help your children to make good financial (and other) decisions that they won’t regret down the road.

Long before you send them off to college, sit down with your high schooler and explain to them very clearly that you are willing to contribute x amount to their college education each year, but for you to be willing to pay that amount, there are some conditions that they have to meet. Here are some examples:

  • They will attend an in-state public school. Unless you have a very inexpensive private school in your state (with a price comparable to the state schools) or your child has a scholarship to a private or Ivy League school or something like that, set up the expectation now that your children will attend a public college.
  • They will be expected to graduate in four years (with a bachelor degree) and attend full time. If they take longer than that because they’re kind of loafing around, taking only 10 or 12 credits a semester, then they can foot the rest of the bill themselves.
  • They will be expected to maintain a certain GPA. I recommend at least a 3.5, but you might find a 3.0 acceptable.
  • They will be expected to work part-time (and full-time during the summer, unless they’re taking classes). Statistically, college students who work part-time earn higher grades than those who don’t. And when you think about it, it makes sense. By working college students further develop important skills like time management and a good work ethic.
  • They will live by the moral guidelines you set. That means if you didn’t allow sleepovers by the opposite sex at your home, for example, you can set the same expectation for your child while he or she is away at college. And don’t feel bad about doing so!

When you hold the purse strings, you wield a lot of power. As long as you have built a strong relationship with your children already and you don’t abuse the power you have, this can be a great tool to help bring about the behaviors (and therefore the continued character building) that you want in your college-aged kids.

 

9. Teach your children how to budget and how to keep expenses low.

Ideally, your children will have learned from a fairly young age how to budget. However, if they do not yet know how to create and live by a budget, teach them before they leave for college. Also teach them basic principles of intentional spending. This means that they know how to differentiate between needs and wants, they know how to spend less than they earn, and they know how to save for future planned and unplanned expenses (such as emergencies) and for larger purchases.

 

10. Seek scholarships.

One of your child’s jobs during high school and college should be to seek scholarships. By working hard in high school and maintaining excellent grades, I was able to receive full-tuition academic scholarships (and sometimes additional scholarships for books and fees) throughout my time at college. If your child is gifted at sports or in another area, he or she should pursue scholarships that way. And there are also many smaller, little-known scholarships that they can seek.

If your child applies for 100 small scholarships and gets awarded only 10 of them, for example, but they are worth an average of $1,000 each, that’s an extra $10,000 he or she doesn’t have to pay out of pocket. That’s worth a little time and effort, for sure! Check out this article written by one of my favorite finance gurus, Clark Howard, for ideas on where to find college scholarships.

 

11. Seek grants.

If your children qualify for Pell grants or other grants, they should apply for them. Because I had full tuition covered I never even thought to apply for grants, but I kind of wish that I had, and then I could have used the money for other college-related expenses such as housing, computer equipment, and more. You can find information about the Free Application for Federal Student Aid (FAFSA) here. For information about other grants, you can review this list of 101 college grants and this online database of college grants.

 

12. Teach your kids that they will work while they’re in college.

As I mentioned above, studies have actually shown that those who work while at college earn better grades. Having your children work while they’re in school will help ensure they avoid student loans, will teach them valuable skills, and will help them to take their education more seriously (and also help keep them out of trouble by having too much free time on their hands :)).

 

13. Teach your children that student loans aren’t an option.

According to a recent study, the average college student graduated in 2016 with $37,000 in student loans! There’s a good chance that they won’t even make that much a year at their first job out of college! Save your children the potentially huge burden of student loans by teaching them that they (and you) will pay for college in other ways and by making education choices that you can collectively afford.

When I was at school I never even had the idea to take out student loans (fortunately!), and we didn’t consider them for my husband, either. And since we hadn’t really been taught by anyone not to use student loans, I’m so very glad that we didn’t so that we didn’t have that financial burden following us for years after college.

I had academic scholarships to pay for tuition, but I paid all other expenses out of pocket from my part-time jobs, and we cash-flowed my husband’s schooling without any scholarships or grants by my working full-time and his working part-time.

 

 14. Expect your children to graduate in four years.

If you intend to pay much or most of the cost for your children’s college education, let them know that they will finish school in four years, or the rest is on them. On the other hand, if they will be paying much of the cost of college themselves, then going to school part time and working part time or even full time may be their best option. Because even if they graduate in five or six years instead of four, the amount of money and stress they will save by not acquiring student loans will be worth it.

And when you look at a working lifetime of 40 (or even more) years, one or two fewer years really isn’t that big of a deal in the grand scheme of things. What will have a far, far greater impact on their ability to build wealth is that you teach them to spend less than they earn (live within their means), to save, and to invest.

When you steer your children to graduate college without student loans, you can help set them on a path of a life free of consumer debt. #debtfreeforlife

 

Conclusion

A college education really can be affordable if you follow the guidelines discussed above. With adequate planning and preparation, you can help your children to graduate from college debt free. As is the case with so many things, the sooner you get started saving for your kids’ college, the better, in order to help them accomplish that objective.

By starting to save early, consistently contributing to a college savings fund, choosing good mutual funds to invest in, guiding your child to select an affordable school, and allowing him or her the opportunity to work to help pay for college, you can help your child to obtain a great college education without any student loans and help him or her learn essential financial and other lessons along the way.

Sign up for the free Personal Capital app to be able to track how your college savings accounts and other investments are doing and 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 regularly! Sign up for your free Personal Capital account here.

For more on this topic, read this article on how to save for kids’ college.

What questions do you have about how to pay for college? Have you started to save yet for your child’s college education? Which type of education savings account are you using or do you plan to use? Leave a comment below and share your thoughts! I would love to hear your ideas!

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A Simple Money Hack That Could Make You a Millionaire

money hack

A Simple Money Hack That Could Make You a Millionaire with Just $100 a Month!

There are lots of simple money hacks that could help you find more money in your budget. And then you can use that money to invest for an awesome financial future.

Read below to find an easy money hack that you can use to potentially save literally hundreds of dollars a month to save for retirement and build your own wealth and future prosperity!

 

Tip: Pin the image above to refer later to this simple money hack to save a million dollars!

 

 

Note: Do you know that you should be investing but you have been too intimidated or afraid to start? Or have you just been overwhelmed with the options or have meant to but just haven’t gotten around to it yet? Join the free 5-day Invest Your Money Challenge to learn the basics of investing and begin to save for retirement and your (awesome!) future today!

A Simple Money Hack to Become a Millionaire with Just $100 a Month!

Did you know that if you invest just $100 a month in your retirement fund from age 25 to age 65 and earned an annual average rate of return of 11 percent, which is very doable long term, you would have $774,992?! And if you were able to earn an annual average rate of 12 percent, also doable long term with good growth stock mutual funds, you would have $1,030,970! And of course if both you and your spouse saved that amount, you would have over $2 million! Isn’t that $1,000,000 or more worth saving just $100 a month?! It sure is to me! I love the power of compound interest!

 

Tip: Are you ready to start investing in order to be able to afford to retire someday but are stuck not knowing how or where to invest your money? Then sign up for my start investing cheat sheet below! It walks you through the simple steps of learning how to invest and the types of funds to invest in to be adequately diversified. No strings attached! I don’t make any money by sharing this information; it’s just the kind of thing I wish someone would have told me 15 years ago when we started investing for retirement.

A Simple Money Hack to Save Big Bucks!

One of the easiest ways to trim your monthly budget substantially is to spend less money eating out. And for those who work outside of the home, one of the simplest ways to save money in your monthly budget is to take lunch to work rather than eating out for lunch regularly.

Lunch is a meal that you can keep oh-so-cheap and easy if you choose to! I primarily eat either a peanut butter and jam or ham and cheese sandwich with fruit and carrots, a simple salad, or leftovers for lunch every day at work, so it keeps things very simple and inexpensive.

It is amazing to me how many of my coworkers go to the food court across the street or eat at the lunch cafeteria every day, and yet some of these same (wonderful) people complain that they can’t seem to find money to save or to invest for retirement like they would like to.

There are many things you can do to trim your expenses in order to spend less money, but one of the easiest is to save money eating out and especially save money eating out for lunch at work all the time!

To me eating a simple, cheap meal for lunch every day at work is totally worth it to save the tons of money that we are able to every year by not buying work lunches at the nearby food court or even the cafeteria where I work.

If I bought lunch every workday it would cost over $100 per month (if I bought inexpensive lunches), and it could easily cost $200 a month if I bought more expensive lunches or indulged in the vending machines and things at work regularly. And of course if my husband worked outside the home and did the same thing, it could easily cost over $200 a month for the two of us just for inexpensive lunches.

And while the average American does not eat lunch out every workday, the average American does spend close to $100 a month eating lunch out every month, according to a survey done by Visa a few years ago (which means the number is actually likely higher now).

That means in married households where both spouses work outside of the home, the average American family spends close to $200 a month (or possibly more; again, the survey was a few years ago) eating lunch out.

By bringing an inexpensive lunch every day and investing the saved money in your Roth 401(k) and Roth IRA instead, that money can grow to literally hundreds of thousands and potentially millions of dollars over the years! Learn the 5 simple steps to start investing for retirement today!

Read below to find more than 20 ideas for inexpensive lunches that you can bring to work to save more money!

 

Note: Are you ready to start investing? Then sign up for the 5-day Invest Your Money, Change Your Life mini course! Learn the basics of investing and how my husband and I choose the mutual funds that we invest in, no strings attached. I don’t make any money from sharing this information. This is just the kind of thing I wish I would have known 15 years ago when we started investing for retirement.

Inexpensive Lunch Ideas to Help You Save Your Money!

Here are more than 20 ideas for inexpensive lunches that you can make and bring from home to work:

1. Peanut butter and jelly, peanut butter and banana, or peanut butter and honey sandwiches

2. Tuna fish sandwiches (with pickle, if desired)

3. Tuna fish and egg salad sandwiches

4. Egg salad sandwiches

5. Lunch meat and cheese sandwiches (with tomato and lettuce or spinach, if desired)

6. Chicken salad sandwiches

7. Grilled cheese (with lunch meat and spinach, if desired) sandwiches and tomato soup

8. Quesadillas (traditional or lunch meat and cheese; add spinach to make them more nutritious)

9. Avocado egg salad sandwiches

10. Bacon, lettuce, tomato, and cheese sandwiches (BLTs)

11. Chicken salad supreme sandwiches

This is a chicken salad sandwich with even more good stuff added, like sesame seeds or peanuts (we generally use the kind we have to shell ourselves, since they are cheaper), chopped grapes, raisins, chopped apples, and dried cranberries.

12. Chicken salad

I tease (but it really is kinda true :-}) that the salad is just the way to get the ranch dressing to my mouth and that the salads that I really like to eat are the ones where I basically turn them into a sandwich. So my favorite chicken salad, for example, has croutons and cheese in addition to my favorite veggies like spinach, tomatoes, broccoli, cauliflower, carrots, and so on.

But whatever you like to put in your chicken salad, you can’t go wrong!

13. Traditional green salad

14. Spinach and strawberry salad

Even though I do not turn this salad into a sandwich :), it is still one of my favorites. All you need are spinach, strawberries, and almonds if you have them on hand (or substitute less expensive seeds or nuts). Here is a simple strawberry spinach salad with tasty homemade dressing:

Ingredients

2 tablespoons sesame seeds
1 tablespoon poppy seeds
1/2 cup white sugar
1/2 cup oil
1/4 cup vinegar
10 oz. fresh spinach, torn into small pieces
4 cups sliced strawberries
1/4 cup slivered almonds

In a mixing bowl, mix the sesame and poppy seeds, sugar, oil, and vinegar.

In another large bowl, combine the spinach, strawberries, and almonds. Pour the dressing over the salad, and toss. Refrigerate 10 to 15 minutes before serving.

15. Avocado tuna melt

If you love avocado and tuna and cheese, you will love avocado tuna melt sandwiches! You can find a simple avocado tuna melt recipe here:

Ingredients

2 5-oz. cans of tuna
3 tablespoons mayonnaise
1 avocado, sliced
4 slices cheddar cheese
8 slices bread
1 tablespoon butter or margarine

Directions
Mix the tuna and the mayonnaise. Butter one side of each slice of bread. Place four slices of bread in large frying pan. Spread each slice with 1/4 of the tuna mixture. Add 2 to 4 slices of avocado on each. Place a slice of cheddar cheese on top of avocado for each. Top sandwich with other slice of bread, butter side up.
Cook on medium high heat until bottom of bread is a golden brown, and then carefully flip over to toast the other side until it is also a golden brown and cheese is melted.
For even more goodness, add tomato and spinach or your favorite lettuce.

16. Avocado and chicken salad

This is another simple and tasty avocado dish, and a great option for a cheap meal. All you need for this easy salad are chicken, avocados, lime juice, green onion, and mayo.

Ingredients
2 cups cooked chicken, shredded
2 medium avocados, diced
1 tablespoon + 1 tablespoon fresh squeezed lime juice
salt, to taste
1/4 cup thinly sliced green onion
2 tablespoons mayo

Directions
In a large bowl, mix the diced avocado with 1 tablespoon of the lime juice, and season with the salt to taste. Add the chicken and the sliced green onion.
In a small bowl, mix the mayo and the lime juice to make the dressing.
Add the dressing to the chicken mixture, and mix well to coat with the dressing. Sprinkle the other tablespoon of lime juice over the top (or omit, if you want less lime juice).
Serve as is as a salad, or serve inside pita bread or as a sandwich or lettuce wrap.

17. Chicken avocado salad sandwiches

Similar to the cheap meal mentioned just above, here is another tasty chicken avocado salad sandwich recipe:

Ingredients

2 cup cooked chicken, chopped
2 ripe avocados, chopped
2 apples, chopped
1/2 cup celery, chopped
1/2 cup red onion, chopped
2 tablespoons finely chopped parsley
2 tablespoon lemon juice
1 teaspoon salt
dash of pepper
8 slices of bread

Directions

In a large bowl, combine the chicken, avocado, apple, celery, and red onion. Gently mash the avocado with a fork and stir it around so that everything is mixed well.

Add the parsley, lemon juice, salt, and pepper. If the mixture seems dry, add a tablespoon of oil.

Spread on sandwich bread, toasted bread, or pita bread.

18. Bacon, lettuce, and tomato wrap

This tasty dish is a simple alternative to regular BLT sandwiches. Simply omit the bread and keep the bacon and tomato, season to taste with salt and pepper, and wrap in large lettuce leaves.

19. Meatball sub sandwich

After a delicious spaghetti dinner, don’t just put that tasty concoction away! Take a few minutes to put some of the meatballs and sauce in a microwave-safe container, grab a couple of pieces of your favorite bread and put them in an airtight bag, and tomorrow you can have a tasty and super quick and easy lunch at work. Just reheat the meatballs, arrange them on the bread, and enjoy!

20. Pasta frittata

The meatballs aren’t the only thing you can repurpose from last night’s spaghetti fest! Making a cheap meal out of pasta frittata is another great way to use up leftovers from spaghetti. All you need are several large eggs, a little oil, some cut up vegetables such as onion and tomatoes and peppers, a couple of cups of chopped spinach, and a little shredded cheese.

Ingredients
8 large eggs
1 tablespoon oil
1/2 cup diced onion
1/2 cup diced tomatoes
1/2 cup chopped peppers
2 cups chopped spinach
4 oz. leftover or cooked pasta (such as penne, elbow, or spaghetti)
1/2 cup shredded cheddar cheese

Directions
In a large bowl, whisk the eggs. Add salt and pepper to taste. Set aside.
Heat a large nonstick frying pan over medium heat. Add the oil. Once it is hot, add the onions, and saute them until they are translucent. Add the other vegetables, and cook them until they are slightly softened. Add the spinach and cooked pasta, and cook for 2 more minutes.
Pour the eggs into the pan, and turn the heat up to medium high. Cook the mixture, frequently lifting up the egg so that the uncooked egg flows underneath, until the egg is almost fully set.
Reduce heat to low, cover the pan, and continue cooking until the eggs are fully set. Uncover the pan and turn off the stove. Sprinkle the cheese over the frittata, and then cover the pan again for another minute or two until the cheese is melted.
Loosen the frittata from the pan and slide it onto a large plate. Slice into wedges, and serve.

21. Easy pasta salad

This is another cheap meal that is quick and easy to make. Use leftover pasta and add in some of your leftover vegetables like broccoli, carrots, onions, or spinach. Toss with a little oil, vinegar, and your favorite spices, and you’re set. You can also add chicken, ham, or another meat of your choice to add protein.

Conclusion

This simple money hack is one way that you can find money in your budget to start investing for retirement and an awesome financial future!

Are you ready to start getting serious about investing for your future? Learn how to start investing for retirement here.

You can also find many ideas for how to save money on groceries, meal preparation, and more in the list of related articles below!

 

Check out these related money-saving articles:

How to Become a Millionaire by Investing Just $200 a Month!
How to Become a Millionaire in 20 Years—Starting from Nothing!
100+ Cheap Meals for When Money Is Tight
42 Cheap and Easy Meals for under $5!
31 Budget-Friendly Easy and Cheap Dinner Recipes
75 Easy Ways to Save Money on Groceries—without Coupons!
5 Cheap Slow Cooker Meals for under $5
7 Simple Steps to Use a Meal Plan to Save Money on Groceries
How to Use a Grocery Item Price Comparison Cheat Sheet to Save (a Bunch of) Money!
19 Top Tips to Save Money Eating Out
Eat Free for Your Birthday!
73 Totally Fun Free and Cheap Activities for Kids!
12 Best Tips to Save Money on Entertainment

 

Do you bring lunch to work in order to save money? If so, what do you bring to eat? I would love to hear how you are able to save money by brown-bagging your lunches for work. Or would you be willing to give it a try if you regularly buy your lunch now while at work? And what other money hacks do you have to save money? Leave a comment below and share 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!

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How to Save Enough Money for Retirement: 12 Crucial Steps

how to save enough  money for retirement

How to Save Enough Money for Retirement

In this article I am going to share my must-know tips for how to save enough money for retirement.

For those who are not used to saving a significant portion of their income, the prospect of saving enough money to retire in comfort can be daunting. With so many bills and expenses related to just today’s spending and financial needs, it’s stressful to have to think about tomorrow’s bills and expenses on top of that.

Because the financial realities of today can so easily consume all of our paychecks, saving for the distant future often seems like an insurmountable task. It’s hard to know where to start and often difficult even when we do know to take the first steps to make lasting changes that make saving for retirement a reality.

But there is no retirement fairy godmother. Social security was never meant to provide on its own enough money for individuals to retire in comfort. And your children will likely have enough of their own financial obligations that they won’t be able to offer much assistance.

So that means that saving for retirement is solely up to you. But that is a wonderful thing, because that means you control your destiny—and being in control of your destiny is an awesome place to be. Following the steps outlined below will help ensure that you have a comfortable retirement, no matter your age or where you are today with your retirement saving.

 

Top tip: Save the image above to Pinterest so that you can easily refer to this article on how to save enough money for retirement later!

How to Save Enough Money for Retirement: 12 Best Tips

Learn 12 must-know tips for how to save enough money for retirement!

 

1. Start investing for retirement as soon as possible—but get your financial house in order first.

Because of the amazing power of compound interest, you should start investing for retirement as soon as you possibly can. There is a saying among financial experts that the best time to start investing was 20 years ago. But the next best time to start investing is today. So work to begin investing for retirement as quickly as possible. But build up at least a small emergency fund and pay off as much nonmortgage debt as possible first (see the next step to learn why).

 

2. Build an emergency fund of at least $1,000 and pay off your nonmortgage debt.

I know this is an article about saving for retirement, but the simple truth is that, as much as I want you to start saving for retirement as quickly as possible to take advantage of the amazing power of compound interest, you need to have a strong financial foundation before you begin saving for retirement. If you don’t have at least a small emergency fund and you have the burden of debt and you begin saving for retirement anyway, when financial challenges—such as a layoff or medical emergency or major home or car repair—come your way, as they eventually will, there’s a very good chance that you will tap into your retirement accounts in order to access the money you need.

That’s why it’s important that you pay off your nonmortgage debt before you start saving for retirement and that you have a starter emergency fund of at least $1,000 in a simple bank account. (We use Capital One 360 for our emergency fund because it allows us to easily set up separate savings accounts for our various savings goals and because the interest rate is much higher than our interest rate at our local credit union.)

I know some of you may feel, once you’ve decided that you are ready to save for retirement, that you don’t want to give up the company match that your employer offers by waiting to save up an emergency fund and pay off your nonmortgage debt. But if you are willing to roll up your sleeves and get out of debt very quickly (ideally, within two years at the most), then the extra money you will have to throw at your debt will be worth the short-term tradeoff of not saving for retirement right away or of pausing your retirement contributions.

Once you have paid off all of your nonmortgage debt—again, in order to not feel the need to fall back on pulling money from your retirement accounts when financial challenges arise—you should start working toward building up a fully funded emergency fund of at least three to six months’ worth of expenses. If you will wait just a little longer on making contributions to your retirement account until you have at least three months’ worth of expenses saved, then you can focus your financial energy on that goal and work to save up that three months’ worth of expenses as fast as possible.

And then once you have at least three months’ worth of expenses saved, you can turn your full attention and intensity to saving for retirement.

Check out these related articles:
How to Become a Millionaire by Investing Just $200 a Month!
How to Become a Millionaire in 20 Years—Starting from Nothing!
How to Start Investing for Retirement: 5 Simple Step
How to Save Enough Money to Fully Fund Your Roth IRA
The Amazing Power of Compound Interest
IRA or 401(k): Which Is Better?

 

3. Commit to stay out of debt in order to save enough money for retirement.

Once you have gotten out of nonmortgage debt, it’s important that you commit to stay out of consumer debt. Getting and staying out of debt really are two of the best things you can do to ensure financial prosperity. That is because when you pay off all of your debt, as financial expert Dave Ramsey says, you free up your largest wealth-building tool—your income.

And because investing for retirement is the number one thing that most people will do to build wealth, it’s important to have as much money available as possible to do that. But when your income is largely tied up in making debt payments, it’s not available to help you work toward long-term financial success. By committing to stay out of nonmortgage debt, you keep more of your money available to work toward financial goals like retirement and paying off your mortgage.

 

4. Create a budget and reduce your expenses where possible.

One benefit of creating a budget so that you know how much money you have coming in and where it is all getting spent is that it will help you avoid going into debt. But beyond that, you should also create a budget, if you are not already using one, so that you will know how much money you have to work with to save for retirement. If your current income and expenses do not allow you to save at least 10 percent of your income (and preferably 15 percent) toward retirement, then work to reduce your expenses.

Some of the areas you can likely cut right away in order to have more room in your budget to save for retirement are to save money on groceries and eating out, transportation, clothing, entertainment, and utilities. You should also look at ways to save money on your housing expenses.

5. Work to increase your income to be able to better reach your retirement goals.

The other important side of the financial equation opposite cutting expenses is to increase your income. There is only so much you can cut to reduce your expenses, (though there is a lot you can do; check out my best tips in the linked article!) but your ability and potential to increase your income is really almost limitless! (And honestly, it’s more interesting and fun to earn more money than spend less money, anyway!)
Sign up below for my free 10-day Earn More Money, Change Your Life Challenge to learn my best tips for how you can start earning more money to reach your financial goals and dreams!

 

6. Begin to save at least 10 to 15 percent of your income toward retirement.

As quickly as you can, arrange your monthly budget so that you can invest at least 10 percent of your income toward retirement (15 percent if you can).

If you are starting a little late saving for retirement or you want to have a more comfortable retirement given the many years you will likely live after you retire, and as your income increases over the years, you should strive to invest at least 15 percent (and possibly more) of your income toward retirement. To do that, continue to examine and adjust your budget, cutting expenses or increasing your income as needed.

And if you are interested in the possibility of retiring early, then you may want to invest 20 percent or more in retirement, or reduce your living expenses—or both!

Once you begin investing for retirement, I recommend that you sign up for 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 regularly! 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!
How to Become a Millionaire in 20 Years—Starting from Nothing!
How to Start Investing for Retirement: 5 Simple Step
How to Save Enough Money to Fully Fund Your Roth IRA
The Amazing Power of Compound Interest
IRA or 401(k): Which Is Better?

7. Invest wisely in tax-advantaged retirement accounts such as a traditional 401(k) or Roth 401(k) and traditional or Roth IRAs.

One of the best things you can do to ensure you have more money available when you are ready to retire is to invest the money you put away for retirement in tax-advantaged accounts. That is because federal income taxes take a big bite out of most people’s paychecks—anywhere from 10 percent to roughly 40 percent! If you are a younger worker (or your spouse is) and you make less money now than you likely will live on in retirement, then investing in a Roth 401(k) if available through your employer and also in a Roth IRA is a great way to go. (You can learn more about the differences between traditional retirement accounts and Roth retirement accounts here.)

When it comes to choosing the funds to use to invest for retirement, you should look to good growth stock mutual funds that have been around for at least 5 years (and preferably 10 years or longer) so that you can see how they have performed during that time.

As you consider which mutual funds to invest in for your 401(k) or IRA (read this article to find out whether a 401(k) or Roth IRA might be better for you), important factors to consider are the long-term rate of return, the expense ratio, the type of mutual fund (large cap, small cap, mid cap, and international), and the longevity of the current fund manager. Read more about how to start investing for retirement here.

Tip: If you would like to know the method we use to choose the mutual funds we invest in for our Roth IRA, fill out the fields below, and I’m happy to share the information with you. No strings attached; this is just the kind of information I wish we would have known 15 years ago when we first started to invest.

 

8. Determine roughly how much you will need to live comfortably when you retire.

To the best of your ability, calculate how much you will need to save overall toward retirement. This number will likely get more accurate as you get closer to retirement age, but you can get a pretty good idea of the amount you should have saved by using this retirement savings calculator (or one like it).

 

9. Invest automatically to help ensure you save enough money for retirement.

One of the best ways to ensure that you invest the amount that you have planned to every month is by automating your finances as much as possible so that the money is transferred directly from your checking account to your Roth or traditional 401(k) or IRA before you have a chance to spend it on anything else! Many employers even have an automatic system set up where they pull money directly from your paycheck and it gets invested in your retirement account before it even gets to your checking account. This kind of automatic investing will help you keep on track to adequately fund your retirement and reach your retirement goals.

For more information about the power of automating your finances, I recommend the book The Automatic Millionaire by David Bach. It was one of the first personal finance books that I read many years ago, and it is still one of my favorites.

 

10. Diversify your retirement portfolio to help ensure you have enough money saved for retirement.

Because stocks have historically outperformed bonds and many other kinds of investment options, you should invest in solid stock mutual funds for long-term financial success. Though stocks have performed very well over time, no area of the stock market performs well all of the time, so it is important to have a well-diversified portfolio. The asset allocation that I recommend is investing 25 percent of your designated amount allotted for retirement investing in each of four mutual fund categories: large cap, mid cap, small cap, and international. You can learn more about this asset allocation model here.

11. Regularly evaluate your progress.

Once you begin investing for retirement, though you can put your investing largely on autopilot (and you should!) by taking advantage of automated investing, you should still review your retirement accounts at least quarterly to make sure your funds are performing as expected and to rebalance your investment portfolio as needed so that it stays in line with where you want it to be (see the part about asset allocation in the section just above).

Sign up for the free app Personal Capital to be able to easily track how your investments are doing and also view your account history to see how your accounts and overall portfolio have done over time. I love this very helpful tool! Sign up for your free Personal Capital account here.

 

12. Work longer.

Assuming your health allows you to do so (and you enjoy what you do for work or are interested in embarking on an encore career), working longer than the typical retirement age of 65 or 67 can go a long way to helping to ensure that you live a comfortable and happy retirement.

 If you have a job where you don’t love what you do, then work on transitioning to a job that you love where you will thrive. Your future financial self will thank you. 🙂

 

Conclusion

You have many options available to you that can help you invest enough money to be able to have a comfortable retirement. And the sooner you start investing, and the more you are able to sock away, especially early on, the better. In order to reach your retirement goal, you will likely need to both reduce your spending and increase your income.

Remaining appropriately diversified in your investing and regularly evaluating your overall financial situation will help ensure that you achieve your retirement goals and dreams.

Are you ready to get serious about saving for your future? You can find more helpful information about investing for retirement here.

 

Did you find this article on how to save enough money for retirement helpful? What tips do you have for how to save enough money for retirement? I would love to hear your ideas! Leave a comment and let me know!

 

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.

 

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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!

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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 Be Smart with Money and Build Wealth [Get Rich the Right Way!]: 9 Best Tips

how to be smart with money

How to Be Smart with Money

An important part of winning at life is learning how to be smart with money because money touches nearly everything that we do in our modern society.

If you learn how to be smart with your money and manage it well, you will be able to accomplish some amazing things in life such as building wealth so that you can have security and do the things you enjoy doing, retiring in comfort, helping those in need, supporting worthy causes, and more.

Tip: Pin the image above so that you will be able to refer to this article easily later!

 

 

9 Must-Know Tips for How to Be Smart with Money

In this article I am going to discuss 9 things you must do related to how to be smart with money.

 

1. Determine your why and set financial goals.

The very first thing I believe you should do when you want to be smart with your money is to figure out your financial why. Why do you want your financial situation to change? Why do you feel you need to pay off debt or start saving more money or investing for retirement? What are your ultimate financial goals and dreams?

Your why is crucial because it will give you the motivation to set crucial financial goals that will change the trajectory of your life. With simple and realistic but amazing and far-reaching financial goals, you will be able to accomplish incredible things with your money that most people never will. That is sad, but it’s true.

Many people go through life half awake, never having the ambition or the discipline or dedication to really accomplish awesome things. But you are not that person! Or if you were, you are not anymore! 🙂

You are going to accomplish incredible things in your life by setting and steadily working toward simple but incredible financial goals like building up savings for emergencies and large expenses, getting out of debt (including paying off that mortgage!), investing for retirement. helping to pay for your children’s college educations so that they will not be saddled with debt, and building wealth so that you can achieve ultimate financial freedom.

 

 

2. Make a spending plan.

Once you have determined your financial why, get after it by creating a plan to accomplish your financial goals—a financial plan, otherwise known as a budget. 🙂 But just call it a spending or smart money plan or whatever you want if you don’t love the b word.

When you create your budget, make it a zero-based budget. In other words, allocate your monthly income down to nothing on paper. You may think that this seems odd; that it would be better to leave a little money as a buffer. And that is great, if you designate that money to be put into a particular savings account or something, like your emergency fund. But don’t just leave the money unaccounted for. The reason? It’s almost certain to get spent.

No budget? No problem! Sign up below to receive a free spending tracker and starter budget forms!

 

Figure out your monthly income.

Ready to start creating your budget? Great!

Your first priority as you create your spending plan is to figure out your total monthly income. If you (and your spouse, if he or she works outside of the home) have a steady, fixed income from an employer, this is really easy. Just look at your pay statements or your bank account where you deposit the money, and record how much you make on your budget.

If your income fluctuates because you work for yourself or work on commission or in sales, then look at your pay statement or bank deposits for the last two or three months, and make your best estimate of your monthly income.

 

Track your spending to determine your expenses.

Next, begin to track your spending or else review debit or credit card transactions and receipts to estimate your monthly spending.

If you buy and pay for most everything with your debit card or credit card, this is really simple. If you don’t, then carry a little notebook with you or jot down your purchases in a note-keeping app on your phone.

Either way, track your expenses for at least a week, but preferably a month so that you get a more complete picture of your spending. If you have not been following a budget or paying much attention to your spending before now, this will likely be very eye opening, and you will likely see some big leaks in your wallet that you will want to plug.

But the good news about that is that once you fill those holes, you will feel like you got a raise! You really will! (Yeah, I might just be speaking from experience. :))

Adjust your budget as needed.

As you are creating your budget and then as you are working to fine tune and follow your budget, be flexible and cut yourself some slack. You are going to find things that you need to adjust, and it will probably take about three months for your budgeting to really start to work. But once it does, the results can be amazing as your money starts to work for you and move you toward your awesome financial goals!

Learn more about how to create a budget (or how to tweak it to make it successful) with this post on the complete beginner’s guide to budgeting.

Tip: I recommend that you start budgeting on paper if you can so that you really have to write down and see where all of the money is going. But after that, you can sign up for an online  budgeting app such as YNAB, Mint, EveryDollar, or Personal Capital if you like to make things easier. But the most important thing is that you do it, so if that means being digital from the beginning, then do it!

 

3. Differentiate needs versus wants to ensure you are being smart with your money.

As you create your budget, begin to differentiate needs versus wants, and make adjustments to your budget as you go along. Sometimes we do a pretty good job of justifying wants by calling them needs. But to truly differentiate needs versus wants, remember this: you need housing (unless you can live under a palm tree or something), but you don’t actually need a fancy or new or even nice home.

Similarly, you need food, but you don’t need restaurant food or gourmet food or to always eat name-brand food. You need transportation, but you may be able to get around with one car for a while (or even possibly no car, if you can use bikes or your feet or public transportation). And you definitely don’t need a brand-new or ultra-safe or super fancy car.

The better you can differentiate needs versus wants and base your budget on your needs first and then the wants that you can truly afford while still saving and investing adequately to meet long-term, crucial financial goals, the better off financially you will be later in life.

As you create your monthly spending plan or budget, allocate money for your needs first. That means designate money first for reasonable food, clothing, shelter, transportation, utilities, and other true necessities.

Then designate money to build up an adequate (three- to six-month; I recommend six months) emergency fund, to create sinking funds to cover future larger expenses and larger purchases (such as app and so on), and to save adequately for retirement (save at least 10 but preferably 15 percent of your income for retirement as soon as you are financially able to).

Learn more about differentiating between needs and wants here.

 

4. See where you can reduce your spending to be smarter with your money.

To be smarter with your money and reach your financial goals, you are probably going to need to reduce your spending. Fortunately, you should be able to cut your spending in the categories below pretty easily by following the tips given for each budget category.

 

Save money on entertainment.

There are many, many ways that you can save money on your monthly or yearly entertainment and related costs. Here are some of the biggest ones:

  • Ditch your dish (satellite) or cable service.
  • Save money on your cell phones or smartphones.
  • Save money on your internet service.
  • Go to the movies less.
  • Buy fewer books and movies (go to the library instead :)).
  • Go to fewer and less expensive music concerts.
  • Go to fewer and less expensive sports games.
  • Spend less on video and computer games.
  • Spend less on electronic devices.
  • Cancel your subscriptions to magazines and paid TV services (Netflix, Sling, and so on—again, videos from the library are free!).
  • Consider canceling your memberships to the gym, rec center, museums, aquariums, zoos, and the like.
  • Spend less money on recreational activities like skiing, bowling, miniature golf, playing arcades, and so on.
  • Spend less on Christmas shopping.
  • Spend less on family vacations.
  • Reduce the amount allocated to your personal monthly spending money (your fun money or blow money).

 

Save money eating out.

The average family in America spends about $3,000 a year eating out. That means there is a lot of money that can be saved here! I know it probably sounds crazy, but we spend less than $300 a year eating out. And I don’t feel deprived! Want to know why? The reason is that that frugality has allowed us to be able to reach other financial goals that we have—and to do it on one average income.

The best thing you can do to save money eating out is to simply do less of it. 🙂 But there are lots of other ways that you can save money eating out, as well! Read this article to learn how to save money eating out.

 

Save money on groceries.

 There are so many—so many!—things that you can do to reduce your grocery spending. I discuss more than 70 ways that you can save money on groceries in this article.

But here are some of the things you can do to save the most money:

 

Check out these related articles:
31 Budget-Friendly Easy and Cheap Dinner Recipes for under $5
42 Cheap and Easy Budget-Friendly Meals for under $5
13 Ways to Save Big When Eating Out!
73 Easy Ways to Save Money on Groceries without Coupons!
59 Must-Know Tips to Slash Your Grocery Bill in Half!
151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money! 

 

Save money on transportation.

 Another way that you really need to be smart with your money is with your spending on transportation. The average car payment in America is close to $500 a month! Is is any wonder that nearly 80 percent of Americans are living paycheck to paycheck? Our savings accounts and emergency funds and retirement funds are sitting in our garages!

So here is what you can do to turn things around and save money on transportation costs:

Find more than 30 tips for how to save money on transportation costs here

 

Save money on housing.

For many families, housing is their single largest expense. But there are also many things that you can do to save money on housing. Here are some of my best tips for saving money on your housing:

  • Shop around to see if you can lower your homeowners insurance premiums.
  • Look into refinancing your home if interest rates have dropped. (But don’t lengthen the term of your loan! If anything, shorten it!)
  • If you are renting, find a cheaper place.
  • If you bought too much house, look at downsizing.
  • If you really want to save money on housing, consider renting out a spare bedroom (or bedrooms) either long term or on sites like Airbnb and Booking.com.
  • Save money on alarm monitoring with inexpensive services like SimpliSafe. (I love SimpliSafe!)

Check out this article for more than 30 ways to save money on housing.

 

Save money on utilities.

You can pretty drastically reduce your utility bill if you want to. Years ago I heard about a professor of economics who just couldn’t bear to see the money spent on utility costs go down the drain because he knew what that money could grow to if it were invested, and so he kept his AC up and his furnace down, and his family wore sweaters and bundled up during the winter and found ways to stay cool during the summer.

We haven’t gotten that extreme in my family (not yet, anyway :)), but it’s a little tempting! Because I hate spending money on things that have no lasting value, too! Sigh. In any case, here are some free and easy ways that you can save money on your utility bill:

  • 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.

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

 

Save money on clothing and shoes.

Some people just love to buy designer clothes and shoes. And they look really nice! But so does a paid-for beach house in retirement. 🙂 So we buy most of our clothes, for us and the kids, either on sale or from thrift stores or the classifieds. For now our kiddos are young, so they don’t know the difference (and I hope that even when they are older, they won’t care—and I hope they never do :)).

My sisters and I also swap clothes back and forth for our kiddos that are the same ages, which is awesome! I love to see the clothes that my kiddos wore on my nieces and nephews; it brings back such fun memories! If you have family or friends with kiddos the same age as yours, see if you can set up a kids clothing co-op!

Read this article to learn easy ways to save money on clothes.

 

5. Comparison shop.

Another super smart thing that you can do to be good with your money is to comparison shop—on virtually everything. When I have done this, particularly with larger expenses like fairly major home and auto repairs, the difference in prices I have been quoted has sometimes been surprising! Get the most bang for your buck by calling several (I usually call at least five) places or checking several stores before making a purchase or spending money on a service like a car, plumbing, or home repair.

This year we wanted to do some fairly extensive home improvements. And one of the things we just got done was to replace our gutters (they needed it!). And like I always do, I called around to several contractors who came out and gave bids. We ended up paying just under $1,000, and I think they did a great job. (From what we can tell; but we’re no construction experts!)

But the difference between the highest bid we got and the lowest was over $500! So please, please, always comparison shop, and the more expensive the purchase, the more places you should compare.

Shortly after we moved into our home (which was a foreclosure and hadn’t been lived in for over a year, maybe two) we noticed that our water wasn’t draining from our showers. And someone at our church gave us the name of a local plumbing company. They came out, and they wanted us to spend $4,000 to dig up a big bush and snake our line and do I don’t remember what else. But $4,000!

So I called around to several other places, and we ended up paying around $400 for a smaller company to come out and just augur through our line and clear out the roots that had grown into it and put down some anti-root stuff.

Now, that first company isn’t a “bad” company, at least not according to Google and my neighbor. They have a 4.5 star rating, with over 2,500 reviews. But I will never use them, that’s for sure! Because they tried to way up-sell us and go for the most expensive option instead of the least expensive (or at least a less expensive option).

And don’t even get me started about auto mechanic shops and how important it is that you comparison shop when getting vehicle repairs done! (Find more than 30 ways to save money on vehicle repairs, maintenance, insurance, and other transportation costs in this article.)

So, again, even when you have recommendations from others you trust, comparison shop. Do your own research and due diligence! Call at least three or four companies (but half a dozen or more is what I do). Want to know other ways we save around the house? You can find more than 30 awesome tips for how to save money on housing here (from maintenance to homeowners insurance and more).

 

6. Put money where it needs to go to be smart with your money and build wealth.

To put your family on solid financial footing and to ultimately build wealth, make sure to do the following things.

 

Build an emergency fund.

As I mention briefly above, it’s important for your family’s well-being that you have a substantial emergency fund. I recommend at least three but preferably six months’ worth of expenses saved in your emergency fund.

If you haven’t already, make your emergency fund its own separate savings account. You may even want to open an account at a different bank so that the money is not too easy to access, if you think you might be tempted to use it for other things besides true emergencies.

Learn more about emergency funds here.

 

Check out these other related articles:

 

Get out of nonmortgage debt.

Once you have at least a starter emergency fund of at least $1,000, another very smart thing to do with your money is to pay off all nonmortgage debt as quickly as possible.

To get out of debt, first figure out how much you owe on your various debts such as credit cards, student loans, car loans, department store loans, and so on.

Then, decide which method you would like to use to get out of debt. Depending on your disposition and what motivates you, I recommend you use either the snowball debt payoff method or the avalanche debt payoff method. Briefly, with the debt snowball method, you pay off your smallest debts first to gain momentum and keep up motivation. With the debt avalanche method, you pay off the debts with the highest interest rates first, and knocking out those higher interest rates could be what keeps you most motivated.

Personally, I recommend the debt snowball method because I think it is a better way to gain momentum, and that is the debt payoff method that we personally used.

Once you are out of nonmortgage debt and are adequately saving for larger expenses and purchases (more on that below) so that you can stop taking on new debt, work to pay off your mortgage early! Being mortgage debt free is amazing, and it is one step closer to ultimate financial freedom!

 

Save for larger purchases and expenses.

After you have paid off your nonmortgage debt, start saving toward large purchases and expenses so that you can pay for them with cash and avoid going back into debt. Debt freedom = financial freedom = peace and joy 🙂

To save for these large expenses, I recommend that you set up several separate savings accounts (also known as sinking funds). We personally have more than 20 different savings accounts for our various financial goals. You certainly do not have to be that detailed, but I would recommend that every family set up these nine savings accounts:

  • Emergency fund
  • Vehicle maintenance and repairs
  • Vehicle purchase
  • Home down payment
  • Home repairs
  • Furnishings and appliances
  • Christmas and gift giving
  • Vacations
  • Miscellaneous/other short-term savings

By having these nine savings accounts and consistently working on funding them, you will have the cash you need to take care of all of the expenses that that occur.

 

Start investing for retirement.

Once your nonmortgage debt is paid off and you are saving toward the necessary expenses above, start investing for retirement. I recommend that once you are out of nonmortgage debt you start to save 15 percent of your income for retirement as soon as you can, but at least save 10 percent.

Remember the incredible power of compound interest and start saving as much for retirement as you can as soon as you possibly can.

 

Check out these related articles:

 

Start saving for kids’ college (if applicable).

If you have children, also start saving for their college educations as soon as possible to take advantage of the power of compound interest and to help ensure that they are not burdened with student loans later in life.

 

7. Consider doing overtime, getting a second job, starting a side hustle, and finding other ways to earn more money.

I believe that 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 those listed below.

 

Do overtime.

Working overtime is one of the simplest ways to make extra money. If your employer offers overtime, then consider taking advantage of it. Especially if you are in a situation where you are working to pay off debt, save up your emergency fund, or save for a large and necessary purchase, working overtime is an excellent option to help you reach those goals more quickly.

Ask for a raise or promotion.

One of the benefits of asking for a raise or promotion is that you receive additional income for (potentially) doing the same amount of work!

If it’s been a few years since you received a significant raise and especially if you’ve been an exceptional employee at work, make a list of your contributions and your accomplishments, and schedule a meeting with your supervisor to request a raise or a promotion. Focus on ways that you’ve earned the company money or saved them money.

If you learn during the meeting 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, consider taking advantage of that opportunity to earn extra income. I have been doing freelance writing, editing, and proofreading 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.

If you similarly enjoy and have a knack for writing, look into freelance writing jobs. You can find ideas for close to 30 freelance writing jobs here.

Freelance proofreading is another great option if you love to read and have a good eye for detail. If freelance proofreading might be a good opportunity for you, then check out this awesome general proofreading course by my friend Caitlyn at Proofread Anywhere!

Look at indeed.com, monster.com, or your favorite job search site for opportunities.

Do consulting or coaching.

Similarly, if you have job experience or a skill that lends itself to it, consider putting that skill to use to do consulting or coaching work. 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 consulting and coaching opportunities on indeed.com or your favorite job website.

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.

Make money with affiliate marketing.

Affiliate marketing is where you recommend a product or service to others, and in return for your sending business their way, a company pays you a percentage of the sale that they made because of your recommendation. Affiliate marketing can be an excellent way to make extra income; those who do it well can make thousands of dollars a month (or much more).

For an excellent course on affiliate marketing, check out Making Sense of Affiliate Marketing by Michelle Schroeder, who makes more than $50,000 a month with affiliate marketing! When I decided to start blogging, Michelle’s course is the first one that I bought.

Interested in finding out more about this truly amazing money-making opportunity? Learn more about affiliate marketing here.

 

Get a (second) job.

If you are in a situation where money is tight or where you have a lot of debt or where you simply want a bigger hammer to pound out your financial goals, then look into the possibility of one of you getting a job or a second job.

If one spouse is not working outside of the home, for example, then consider whether it would be worthwhile for that spouse to start earning an income (perhaps with a job that could be done exclusively from home).

Similarly, if one of you works only part-time, you might want to consider  going full-time at least temporarily in order to reach your financial goals more quickly.

Or consider if one spouse is available to get a second job in the evenings or on Saturday, for example, and earn more money that way.

Earn passive income.

Some options for earning passive income are to create a product you can sell, write a book, create a money-making podcast or vlog, or develop an online course. 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, Amazon, or your local classifieds.

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 extra cash!

Have a garage sale (or regular garage sales).

Declutter your home and earn money, all at the same time!

 

Check out this article to learn more about and find more ideas for increasing your income!

 

Would you like 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!

8. Automate your finances.

Another smart thing that you can do with your money that will really help you to be successful with your finances is to automate your finances as much as you can. By automating your finances, you’re not left so susceptible to temptation. And you are able to effortlessly work toward reaching your financial goals and can do so without having to make the conscious decision to save or invest or pay off debt every time you get paid.

Right after you get paid, transfer money directly to pay extra toward debt, into your emergency fund and other savings accounts, and into your  401(k) or Roth IRA. Take care of your financial goals effortlessly by funding them automatically! And then live on what is left.

You should automate your finances in order to get paid (through direct deposit); save for emergencies, large purchases and expenses, and so forth; pay off your debt (as long as you are not in an adversarial relationship with anyone you owe money to); pay bills; invest for retirement; save for kids’ college; and more.

Read this article to learn more about automating your finances.

 

9. Stay out of debt to be smart with your money.

The best way to be able to build wealth, and one of the best ways to be smart with your money, is to first get out of debt and then stay out of debt. That is because when you get out of debt—as one of my favorite personal finance gurus, Dave Ramsey, says—you free up your biggest wealth-building tool: your income.

By paying off all of your debt—including eventually paying off your mortgage—and then staying out of debt you will have all of your income to use to meet your needs and build your wealth, instead of the bank’s. And ultimately, you will be able to achieve financial freedom.

 Learn how to get and stay out of debt.

Conclusion

As you follow these steps for how to be smart with your money, you will be able to move yourself and your family steadily toward financial freedom. First you will be able to achieve freedom from overspending, then freedom from living paycheck to paycheck, then freedom from the stress of having no financial cushion (savings), then freedom from being in debt, and then ultimate financial freedom—from having to work.

With ultimate financial freedom, you will get to the point where you can choose when and how you want to work, or if you want to work. Your time will be your own to accomplish the amazing things that you want and maybe even were meant to do in your life.

So be smart with your money and go after your amazing financial goals!

 

What do you think are the most important steps related to how to be smart with your money? Did one of the steps above inspire you to try something new? Where are you on the journey to financial freedom? Let me know your thoughts in the comments below! I would love to hear your best ideas for how to be smart with your money!

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How to Retire Early: 11 Easy Steps!

how to retire early

How to Retire Early

In this article I am going to teach you practical steps for how to retire early and achieve financial independence, no matter your current financial status. If you are longing to know how to retire early, then this is the article for you!

Tip: Save the image above to Pinterest so you can easily refer to this article on how to retire early later!

 

How to Retire Early: 11 Simple and Surefire Steps to Make the Dream a Reality!

The idea of being able to retire early is a truly awesome possibility to think about. It was actually reading a FIRE—which stands for Financial Independence, Retire Early—blog (and then several more FIRE blogs) that gave me the idea of blogging about personal finance in the first place. I can definitely appreciate the FIRE bloggers’ desire to retire early and, even more, to have financial freedom.

Since I’m already in my late 30s I learned about the FIRE movement a little late to be a super early achiever of FIRE, but I still plan to retire early—by 55 if possible, or even earlier than that if I can. If you too love the idea of retiring early, then the information below can help you reach that goal! Success to you! (And if you’re already on your way to retiring early, let me know in the comments below how you’re doing!)

Here are 11 simple steps for how you can retire early, even if you haven’t started saving for retirement yet!

 

1. Start investing for retirement as soon as possible in order to retire early—but get your financial house in order first.

Because of the amazing power of compound interest, you should start investing for retirement as soon as you possibly can—no matter what age you want to retire. But that is particularly true if you hope to be able to retire early.

There is a saying among financial experts that the best time to start investing was 20 years ago. But the next best time to start investing is today. So work to begin investing for retirement as quickly as possible.

But, so that you will be on solid financial footing, build up an emergency fund and pay off as much nonmortgage debt as quickly as possible first. Otherwise, when you have a financial setback (and statistically, it is a matter of when and not if that you will have financial hardships), you might have to pull money from your investment funds to pay for the emergency, and that is a bad idea because of the potential penalties and fees and the ability you then have lost for that money to grow.

You can learn how to create an emergency fund here and how to get out—and stay out—of debt here! And learn 5 simple steps to start investing here.

Once you begin investing for retirement (or if you already have), you should 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 regularly! Sign up for your free Personal Capital account here.

 

2. Begin to save at least 10 to 15 percent of your income toward retirement (and then save even more when you can in order to retire early!).

As quickly as you can, arrange your monthly budget so that you can invest at least 10 percent of your income toward retirement (15 percent if you can). And if you are starting a little late saving for retirement or you want to have a more comfortable retirement given the many years you will likely live after you retire, and as your income increases over the years, you should strive to invest at least 15 percent of your income toward retirement. And then increase that amount as soon as you can to help you retire sooner!

To do that, continue to examine and adjust your budget (learn how to set up a simple budget here), and work to both cut your living expenses and increase your income.

As long as you are pretty young (say, mid-20s to early 30s), then if you want to retire by age 55 or so (and you expect to have about the same lifestyle as you have now), saving 15 percent of your income in a Roth 401(k) (or even traditional 401(k) if a Roth 401(k) isn’t available) and Roth IRA should get you there.

So, for example, if you are pretty early on in your career and you earn $50,000 a year and have saved $20,000 so far for retirement, if you invest 15 percent of your income every month from age 30 to age 55, you would have $1,460,005. If you will keep your money invested in good stock mutual funds throughout your retirement years, you will be able to earn enough to live on about 10 percent of your retirement fund (nest egg) and never touch the principal.

So you could live on about $140,000 per year, which even adjusted for inflation, should be enough for you to scrape by on. 🙂 And that’s if you never got a raise in that 25 years and therefore never increased your monthly retirement contribution amount.

And of course, you could choose to take out more and draw down the principal at some point, as well.

Also, as an important FYI, if you work for a company that offers a retirement account such as a 401(k), you can actually start pulling from your 401(k) at age 55, as well, penalty free—pretty awesome, right? Retiring at age 55 really is doable if you’re willing to sacrifice just a little bit to reduce your spending in other areas of your budget. And it’s even more possible if you’re willing to work to increase your income.

 

 

3. Determine roughly how much you will need to live comfortably when you retire.

As you are making your plans for how to retire early, calculate to the best of your ability how much you will need to save each month toward retirement. This number will likely get more accurate as you get closer to (early!) retirement age, but you can get a pretty good idea of what you will need to contribute by using this retirement savings calculator.

 

4. Be willing to work harder to increase your income, live on less in retirement, or else invest even more aggressively if you want to retire earlier than age 55.

If you want to retire earlier than age 55, then you can either reduce the amount you are willing to live on each month in retirement or increase the amount you invest each month.

This means you will either need to increase your income or reduce the amount you live on now. Or, for a double whammy, do both! To learn how others have been able to retire early, read this article on the fascinating FIRE—Financial Independence, Retire Early—movement.

If you could live on $70,000 per year in retirement (a little less than $6,000 per month), for instance, and keeping the rest of the numbers the same as our earlier example above, you could retire at age 49. And without any debt, if you own your own mortgage-free home, even adjusted for inflation (at an average rate of 3 percent per year), many people could get by fairly comfortably on the $40,000 worth of buying power that that amount of money would represent in 19 years. 

And if you are investing in a Roth 401(k) or Roth IRA, then the money would be tax free. That would mean you would have even more money available to you to live off of.

Note: If you’re going to retire before age 55, then you will probably want to do some investing outside of retirement accounts, in order to avoid the 10 percent penalty that you incur if you take money out of your retirement accounts before that age.

Or, as a possible alternative, you could also look at making use of the 72(t) tax rule, which allows you to use money from your retirement account if you choose to take out at least five “substantially equal periodic payments,” of an amount determined by your life expectancy, from your 401(k) and IRA accounts. Talk to your accountant if you have questions about this retirement strategy.

Now, going back to our example above, if in addition to being willing to live on $70,000 a year in retirement you were willing to invest $1,200 a month (about 29 percent of your income, in our example scenario above), then you could retire in 15 years, at the age of 45. Yes, that would require a lot of sacrifice, to save $1,200 a month—I don’t deny that. But you would also be retiring at 45 years old, and you would be accomplishing this amazing feat on an annual income of $50,000 per year! If you want to play with some numbers yourself, try this simple investment calculator. Fun times!

But let’s say you wanted to retire early—really early. And let’s pretend you had a higher-paying job, as most of the FIRE folks do, and you made $100,000 per year, or $8,333.33 per month. And let’s say you also started investing 36 percent of that great income, or $3,000 a month, at 25 years old after you earned your master’s degree in business administration (or information systems or another potentially high-paying field). If you did that, you would be able to retire at age 35! Amazing!

Yes, investing $3,000 a month even with that great income would likely still be a sacrifice, but you would be able to live on around $4,000 a month (depending on your tax bracket).

And that’s a good thing, because that’s also roughly what you would be living on, adjusted for inflation, later in your retirement. So I know that’s no caviar lifestyle, but millions of people and hundreds of thousands of families in America live on that much (or less) every month. And think of the reward for doing that! Retiring at age 35!

What do you think? Is it worth it to buy your financial independence—your financial freedom—so young in life? Leave a comment below and let me know your opinion!

Read this interesting article from Mr. Money Mustache to learn more about retiring early and how much you need to invest out of your income to retire after working for certain numbers of years.

 

 

5. Find ways to reduce your expenses in order to retire early.

As explained above, finding ways to reduce your expenses is a doubly effective way to help you retire early. By reducing your expenses you can save more each month for retirement, but by maintaining that lifestyle you also need less money to provide for your needs during early retirement.

You can probably reduce your spending for almost every item in your budget, if you become very intentional with your money. There are so many ways to reduce your spending, in fact, that I’m not going to list them all here because it’s enough great content to be an article (probably a book!) all on its own. For a great list of ways that you can start spending less money in different areas, read this article with more than 20 ideas on how to reduce your spending in various areas.

But here are just a few ideas to get you started:

Check out these related articles:

 

6. Work to increase your income to be able to better reach your early retirement goals.

As the examples above show, if you want to retire early the other important side of the financial equation opposite cutting expenses is to increase your income. There is only so much you can cut to reduce your expenses, but your ability and potential to increase your income is really almost limitless.

There are many, many ways that you can earn extra money, and many of them you can do right from home. Some of those include doing a side hustle to earn extra income, such as blogging (of course! my favorite :)), freelance writing or editing, proofreading, transcription, translation, doing work as a virtual assistant, bookkeeping, accounting, doing IT work, doing customer service, and more.

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.

 

7. Invest in tax-advantaged retirement accounts such as a traditional 401(k) or Roth 401(k) and traditional or Roth IRAs so that you can retire early.

One of the best things you can do to be able to retire early is to invest the money you put away for retirement in tax-advantaged accounts.

That is because federal income taxes take a big bite out of most people’s paychecks—anywhere from 10 percent to roughly 40 percent! If you are a younger worker (or your spouse is) and you make less money now than you likely will live on in retirement, then investing in a Roth 401(k) if available through your employer and also in a Roth IRA is a great way to go. (You can learn more about the differences between traditional retirement accounts and Roth retirement accounts here.)

On the other hand, if you are a high-income earner and plan to live on a lower percentage of your income during retirement (like many of the FIRE folks), then you will probably want to instead invest in traditional 401(k)s (or similar plans offered by your work) and traditional IRAs.

8. Invest wisely in good stock mutual funds to retire early.

Another important factor in being able to retire early is to choose wise investments. When it comes to choosing the funds to use to invest for retirement, you should look to good growth stock mutual funds that have been around for at least 5 years (and preferably 10 years or longer) so that you can see how they have performed during that time.

As you consider which mutual funds to invest in for your 401(k) or IRA, important factors to consider are the long-term rate of return, the expense ratio, the type of mutual fund (large cap, small cap, mid cap, and international), and the longevity of the current fund manager. If you would like to know how we choose the mutual funds we invest in for our Roth IRA, fill out the fields below, and I would be happy to share the information with you. No strings attached, and I don’t make any money or earn any kind of commission or affiliate income from sharing this information. It is simply the kind of information I really wish I had had when we first started investing for retirement over a decade ago.

9. Diversify your retirement portfolio.

To help ensure that you are able to retire early, it is important that you diversify your investment portfolio. Because stocks have historically outperformed bonds and many other kinds of investment options, I recommend that you invest in solid stock mutual funds for long-term financial success.

Though stocks have performed very well over time, no area of the stock market performs well all of the time, so it is important to have a well-diversified portfolio. The asset allocation that I recommend is investing 25 percent of your designated amount allotted for retirement investing in each of four mutual fund categories: large cap, mid cap, small cap, and international. You can learn more about this asset allocation model here.

 

10. Invest automatically in order to retire early.

One of the best ways to ensure that you invest the amount that you have planned to every month in order to retire early is by automating your finances as much as possible so that the money is transferred directly from your checking account to your Roth or traditional 401(k) or IRA before you have a chance to spend it on anything else. Many employers even have an automatic system set up where they can pull money directly from your paycheck and it gets invested in your retirement account before it even gets to your checking account.

This kind of automatic investing will help you keep on track to adequately fund your retirement and reach your early retirement goals. For more information about the power of automating your finances, I recommend the book The Automatic Millionaire by David Bach. It was one of the first personal finance books that I read many years ago, and it is still one of my favorites.

 

11. Regularly evaluate your progress, and adjust when needed.

Once you begin investing for retirement, though you can put your investing largely on autopilot (and you should so that you know it will happen regularly!) by taking advantage of automated investing, you should still review your retirement accounts at least quarterly to make sure your funds are performing as expected and to rebalance your investment portfolio as needed so that it stays in line with where you want it to be.

Sign up for a free Personal Capital account to be able to track how your investments are doing and also view your account history to see how your accounts and overall portfolio have done over time. Because you can link your checking and savings account, credit card accounts, and investment accounts, it’s a great way to see your overall financial picture. I love using this very helpful personal finance tool. Sign up for your free Personal Capital account here.

You can find more information on investing for retirement here.

 

Conclusion

If you want to retire early, you really can do it if you are willing to work hard and smart and to sacrifice some of your current wants in exchange for your (early) financial freedom. Regularly studying and learning more about how to retire early will help ensure that it happens.

By starting early, reducing your living expenses, investing a significant amount of your income, and choosing wise investments, you can retire years or even decades earlier than the average person.

If you are serious about retiring early then start investing as much as you can today! And let me know your progress—I would love to cheer you on!

 

What did you find most helpful in this article about how to retire early? Do you aspire for FIRE? What other tips do you have for how to retire early? Leave a comment below and let me know your thoughts!

 

how to retire early

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.

5 Crucial Steps to Financial Freedom

steps to financial freedom

 

Steps to Financial Freedom

In this article I will share 5 simple steps to financial freedom. By following these simple steps you will be able to achieve financial freedom for you and your family! And you’ll get there before you know it!

 

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5 Simple Steps to Financial Freedom

If you are looking for simple steps to reach financial freedom, then this article is for you! There are many things you can do to help you achieve financial freedom, but these are 5 of the most important steps to help you reach financial independence for you and your family. Follow these simple steps to start working toward your financial freedom today!

 

1. Build a six-month emergency fund.

As a first crucial step for financial freedom, save up a six-month emergency fund.

To achieve true financial freedom, you have to be able to take care of life’s financial setbacks. And those setbacks do happen. Cars break, roofs leak, windows get broken, kids break bones, car accidents happen, people get laid off from work or become permanently disabled—no one is immune from financial problems. And in order to reach and maintain financial independence, you need to be able to take care of those financial challenges when they arise.

That is where a six-month emergency fund comes in. By having at least six months’ worth of expenses in an emergency fund you can pay for these financial challenges as they come up.

While you are working toward financial freedom, if you have a stable job (and especially if you have two stable jobs) and you have newer cars and a newer home and no major health conditions, you might decide to get by with a three-month emergency fund. But as you get closer to complete financial freedom, you should plan to have a six-month emergency fund.

Learn about how to create an emergency fund here.

2. Get out of all consumer and other nonmortgage debt.

Once you have an adequate emergency fund, begin to aggressively pay off all nonmortgage debt. That includes credit cards, student loans, medical debt, installment loans on furniture and appliances, auto loans, personal loans, and all other debt so that you can cover any large financial setbacks that might come your way.

One very effective modification to this step is to build just a starter emergency fund of $1,000 (or up to one month’s worth of expenses, if you want to save a little more) until you have paid off all of your nonmortgage debt. Then you would work to pay off all of your debt as quickly as possible.

With a starter emergency fund in place, if you have financial trouble while you are working on getting out of debt, even though you won’t have a full emergency fund, you will have enough that in the vast majority of situations you won’t have to go deeper into debt to take care of it.

The sooner you can get out of debt, the better! When you are debt free, as Dave Ramsey teaches, you get control of your most powerful wealth-building tool—your income!

Read this article to learn how to get and stay out of debt.

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3. Invest regularly to fund your (amazing!) retirement.

As a next step to your financial freedom, once you are out of nonmortgage debt, start to invest systematically for retirement.

If you work for a company that offers a retirement plan (such as a Roth or traditional 401(k) or 403(b)) where they match your contributions, start there, and invest up to the match. If you don’t have a match available to you, and once you have met the match, then open a Roth IRA and start funding it.

If you can, save 15 percent of your income between your company retirement fund and your Roth IRA so that you can build a nice, comfortable retirement for yourself.

Once your income is high enough or if you aren’t able to contribute to a company retirement plan, max out your Roth IRA ($6,000 per year, or $500 per month).

Read this article to learn more about investing for retirement, such as what to invest in and how much to invest in various types of mutual fund accounts.

 

4. Pay off your mortgage!

Once you have paid off your nonmortgage debt and are investing 15 percent of your income toward retirement, start getting serious about paying off your mortgage as soon as you can!

My husband and I have owned two modest homes, and we were able to pay them both off (not at the same time; one and then the other :)) in less that 6 years. I definitely don’t say that to brag but rather to give you hope and encouragement and let you know that you can totally do it, too! Because we were able to pay off those two mortgages on just one average income, too! But we’re nothing special; we have just been burned by debt and by other stupid financial decisions we made when we were younger, and so now my husband and I are very intentional with our money. We’re not perfect by any means, but we have become savers, and we have figured out a lot of the tricks to win this money game.

Don’t worry; they’re pretty simple, and you can figure them out too! Just keep studying and learning and trying! And you’ll be mortgage debt free before you know it!

Read this article to learn the 7 simple steps that allowed us to pay off our mortgages early!

 

5. Save and invest systematically to build wealth.

As a final step to financial freedom, save and invest regularly to build wealth so that you can stop working when you want to.

Even if you decide not to shoot for FIRE (Financial Independence, Retire Early), having enough money so that you could retire if you wanted to or needed to is the ultimate level of financial freedom for many people.

If you are currently living paycheck to paycheck or if you regularly overspend, learn how to break that cycle so that you will have money to save and invest to reach your awesome financial goals and to finally reach financial freedom.

 

Conclusion

By following these simple but crucial steps to financial freedom, you really will be able to achieve financial independence, and you will be able to do it far sooner than you probably ever thought possible.

And while you’re at it, in order to put yourself and your family on wonderfully solid financial ground, check out these cool things to save up money for to run your financial house smoothly.

 

What does financial freedom mean to you? What steps to reach financial freedom are you planning to follow ? Do you have a goal for when you hope to achieve financial independence? Leave a comment below and let me know—I would love to hear 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!

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