To reach financial independence, spend less than you earn and invest the rest.
This is our moto. It’s simple advice but it’s so true. It’s also not followed that much. Here are some statistics illustrating the lack of savings in American:
64% don’t think they’re on track to retire
25% have no retirement savings
69% have $1,000 or less in savings
25% have no savings
The median household has a total of $5,300 saved
51% have less than 3 months’ worth of savings
30% have more credit card debt than savings
Financial independence means retirement for some people but it is really when you don’t need to work. Your investments will cover your financial needs for the remainder of your life if you don’t work anymore. It’s a very liberating goal.
It requires sacrificing now so that you can benefit later.
Investing just $250 per month in the stock market for 40 years will give you $1,401,672 (at 10% return). Stock market returns are not a straight line with equal returns each year but over the long run stock markets go up and at a good rate.
The more you save now the easier it will be in the future to reach your financial goals. Investments grow over time. The more time you have, the more they will grow. Compound interest is the understanding that your investments grow and then the growth grows as weil. This compound investment return will make your investments take off if given enough time.
- If you get a bonus, invest most of it
- As you get raises, increase your investing – not your spending
- Pay off your debt, especially high interest debt
- It may help to forego daily restaurant meals and/or coffee shop drinks
- Consider reducing the cost of your vacations – favor camping and hiking to cruises and guided tours
- Consider trips within driving distance instead of flying far
- Prioritize your spending – save for the expenses most important to you
- Consider a second income (a side hustle) – it can be fun and profitable
- Ask for a raise
- Simplify gifts – put in more time, energy, and creativity instead of a large expense.
To reach financial independence, spend less than you earn and invest the rest.
– Bill