Money habits that made me debt-free and on track to retire by 45

In 2012, fresh out of graduate school, I spiraled from being optimistic about my future to feeling constantly anxious about money. I had recently moved to Washington, D.C., with a $40,000 starting salary, almost $45,000 of student debt and very little savings. 

I used an interest calculator and learned that if I continued to make only the minimum payments on my student loans over the course of 10 years, I would pay $16,000 in interest on top of my original debt.

My heart sank, but I was determined to improve my situation.

Within three years, I paid off my debt, and the next year I doubled my income. In 2017, I bought my first home before my 30th birthday. In 2019, inspired by my experience, I started a company called Beworth Finance to help others build wealth and gain confidence about their finances.

Today, at 36, I’m on track to retire by 45.

Here’s how I changed my money mindset and got rid of my financial anxiety for good.

I started with small but powerful changes

I used automation to reduce my financial stress 

Turns out, it wasn’t just having debt that made me anxious — it was feeling like I had no control. So as I got more confident with money, I turned to technology to help with the goals I stressed over. 

I automated my savings contributions, put my loans on autopay and began investing using a robo-advisor that selected and managed my investments for me.

Over time, these contributions became an afterthought. Technology helped me reach my goals more quickly thanks to added benefits like higher interest rates for savings and reductions using autopay. Once I was debt-free, I reallocated those funds toward saving for a home by simply updating the same automations I set years prior. 

That simple system of automation ultimately helped me accomplish one of my biggest goals: homeownership. In July 2017, I bought my first home in Washington, D.C., a 514-square-foot one bedroom, one bathroom apartment, for $345,000, with 10 percent down. 

I avoided lifestyle creep

I invested in my future 

Last year, I invested over 45% of my income, a big jump from when I only invested about $133 per month. Now, in addition to maxing out my 401(k), I max out an individual retirement account and invest everything else in a taxable brokerage account, mostly in index funds. 

If I never contribute another dime to my retirement, I’m on track to have over $3.7 million by age 65. I still invest aggressively because I want to get there sooner. Assuming a 7% annualized return, I currently plan on retiring by 45 with about $1.7 million.

It’s also okay if things change along the way. 

In the personal finance industry, many people define financial freedom as when you can afford to retire. My view is a little different. I found financial freedom when I took control and automated that first extra debt payment. 

Ultimately, while more money is helpful and it certainly can bring security, it’s these small habits that truly gave me confidence, then and now. My financial anxiety is a thing of the past, and that, to me, is true financial freedom. 

Kimberly Hamilton is the founder of Beworth Finance, an Accredited Financial Counselor and the author of “Building Wealth on a Dime.”

Want to make extra money outside of your day job? Sign up for CNBC’s new online course How to Earn Passive Income Online to learn about common passive income streams, tips to get started and real-life success stories. CNBC Make It readers can use special discount code CNBC40 to get 40% off through August 15, 2024.

This 31-year-old brings in $300K with his vending machine business — here's how

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Secular Times is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – seculartimes.com. The content will be deleted within 24 hours.

Leave a Comment