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Thursday, June 13, 2024

I used to owe $40,000 and now I’m on track to retire at 65 with over $1.5 million: Here’s my best advice

Four years ago, my wife and I had a combined $40,000 debt that we were struggling to pay off. We were living paycheck to paycheck, had no savings, and we weren't tracking our spending or our overall money goals. At times, we would sell some of our clothes to thrift shops to get gas money until our next paycheck.

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Today, we are debt-free, I have roughly $113,000 invested in the stock market, and including my investments, I've saved a little over $160,000. 

Even if I never invest another dime in the stock market after today, with compound interest and an average annual rate of return of 10%, I am on track to retire at the age of 65 with nearly $2.9 million. Using a more conservative annual rate of 8%, I'd still be able to retire at 65 with a little over $1.5 million.

So how did a Latinx, queer, and nonbinary former shopaholic and people-pleaser go from a negative net worth to being on the path to financial independence? 

These are the steps I took to get here. 

I didn't wait to invest while paying off my debt 

First my wife and I put together a budget, assessed the debt we had, and we began to pay it off via the debt avalanche method. Some of our goals, like starting emergency and travel funds, were more immediate. Others, like ramping up our retirement savings, were more abstract at first. 

We understood investing was important, though we did not know much else about how to do it. I did know that I didn't want to hold off on planning for the future while we were tackling this debt. 

We both had individual IRAs, though initially, I thought I needed to have it linked to an employer to do anything with it. Once I realized that I could contribute on my own, I started putting in a little bit at a time each month. 

Two years into our debt payoff process, I started a new 9-to-5 after being laid off, and I opted for my company match, which was 10%. Consistently contributing to both those accounts became one element of our broader investing plan. 

I started a variety of side hustles 

We started making some headway, but in order to save as much as we wanted to and work toward our bigger goals, we needed to make more. My wife and I were both able to negotiate for higher salaries at our day jobs, and we began taking on side hustles as well. 

I've been a side hustler since I was in high school. I've always loved the fact that I could generate money from my own creative energy. If I ever needed more money, I knew how to go out and be innovative and scrappy with my resources.

We took on a variety of side hustles, including reselling and flipping items online using sites like eBay, Poshmark, Mercari, freelance writing and design, blogging, establishing affiliate marketing and sponsorships with several partners through my blog, speaking engagements, and online workshops, selling digital products online through my blog and Etsy, and even pet sitting on Rover.

Side hustles have always been about more than extra money for me. They have helped me hone certain skills and learn new ones that I can put on my resume, have helped boost my confidence, and have given me more options when I needed to leave a toxic job situation. 

They can also compound as an asset over time and become mostly a passive source of income, which is where I am almost at with my blog. Over 50% of my blog's monthly income is completely passive, and we have invested much of that income into our retirement funds

I found a community of like-minded people 

In 2019, about two years into our debt-payoff journey, I learned about the Financial Independence Retire Early movement, and it completely changed my perspective.

A central concept of the FIRE movement is that if you save and invest enough money, you can retire before the more traditional age of 65. If you calculate your annual expenses and then multiply that figure by 25, that will give you the amount that you need to have in savings and investments to become completely financially independent from a 9-to-5.

There is some flexibility if you have multiple passive sources of income and can expect to earn money from something like a blog or a rental property

I never thought early retirement was an option for me. I didn't come from a wealthy family or have a trust fund. I had no idea how this could even be a realistic goal. But then I started to do the math. 

Even though we were paying off debt, my side hustle income and my passive income streams could provide me with funds to invest in my future, while still having enough to live a comfortable life where we weren't depriving ourselves. 

For a long time, I had worked either partially remote or fully remote so I could travel whenever I wanted, but I still felt like my time wasn't really mine. I didn't want to work until my old age and I didn't want to live my life anymore on someone else's terms. 

I didn't want to wait any longer to get more of my time back. I wanted to invest in myself and start buying back that time now.

I started working towards financial independence 

As I started sketching out those plans, I realized that I didn't want to completely retire, because I wanted to continue to do creative work that I enjoyed. 

I calculated that my passive income streams would allow me to do the kind of work I wanted, while being location independent and financially independent from a 9-to-5.

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