Is it too late to build retirement savings in the mid-30s?
Is it impossible to aim for FIRE with freelance income? Absolutely, no. We can make retirement savings at any age.
I became debt-free in my mid-30s and started to save money after that. To reach financial freedom, we need to take control of our finances through an efficient money management system.
In this post, I’m delving into my money story and sharing the details of how to save $100k based on what I did.
Disclaimer: I’m not a financial expert. All content provided is for informational purposes only. This post may contain affiliate links, meaning I get a small commission if you decide to make a purchase through my links, at no additional cost to you. Please read my full disclaimer here for more info.How To Save $100K In 3 Years Click To Tweet
Pay off the mortgage faster
We purchased a condo in 2013 and planned to pay it off in 15 years. However, the U.S. economy started to face a strange moment after the pandemic. Therefore, we changed our plan. We were focused on paying off the mortgage as soon as possible and, paid it off in 8 years.
How? Paying additional principal on a mortgage saved thousands of dollars in interest.
Assume you borrowed $250,000 to purchase a home at 4% interest for 30 years. 4% interest for 30 years will be $179,674, so the total cost would be $429,674. What does it mean? You’ll pay $429,674 for a $250,000 value home. Sometimes you can buy another condo with only interest payment. Paying down your mortgage early reduces the amount that you’ll pay over time.
Related Post: How to Pay Off Mortgage In 8 Years
Graduate college without student loan
I didn’t go 4-year university directly because they are super expensive.
For example, the average total cost of a public 4-year university in the United States is between $101,948 and $172,644. On the other hand, the average total cost of a public 2-year college is $31,496. To get a degree, we usually need 120 credits. I transferred 49 credits from a community college. So, I needed to pay for 71 credits instead of 120 credits at my 4-year university. It was a big saving!
Also, I had a full-time job when I went back to college. It was not easy to maintain a student life and a full-time job. But it was super helpful to my finances.
Related Post: How to Earn a Degree Without Going into Debt
Kept my expenses low
I stop drink alcohol so that was a big saving. Eat at home except on weekends, shop with a list, and declutter the house/closet, these helped me to keep my expenses low.
Use cashback websites when I shop online
My favorite cashback websites are Mr. Rebates and Rakuten. Each cashback is small, but a small amount of money makes a big difference in a few years.
Make more money
I started selling on eBay and Poshmark as part of my spring cleaning at first, but it gradually became one of my side hustle income sources. For now, my eBay and Poshmark account is making an average of $1,000 monthly.
I’ve also tested out different ways to make extra money from home. I do not recommend dropshipping, but I used to make $14K from it. My new side hustle virtual assistant is constantly making $2000 monthly. I recommend that you try different kinds of side jobs to find the one that suits you best.
Related Post: Massive List of Gig Economy Jobs for Extra Income
Pay off all credit card debt at once
It’s a good idea to pay off your credit card balance in full every month. A credit card can be a great way to break large purchases into smaller, more manageable payments. However, carrying a monthly credit card balance can cost you interest and increase your credit utilization rate, which is one factor used to calculate your credit scores. Maintaining a good credit score provides me with “pre-approval” which make more power to negotiate on price. This saved me a lot of money when I make the big purchase.
Share a car
During the pandemic, my husband started working from home.
We started to feel that paying two car insurance was not worth it. So, we sold one of our cars and then canceled one of our auto insurances. It’s saved a lot of money for us!
I knew having a car is expensive, but I realized even more how much money we can save not having two cars.
Start Solo 401(k)
A freelancer, sole proprietor, independent contractor, or entrepreneur can start reducing taxable income right away with a solo 401(k) plan.
A solo 401(k) is an individual 401(k) designed for a business owner with no employees. So, you can’t contribute to a solo 401(k) if you have full-time employees.
As the employee (yourself), you can contribute up to $22,500 in 2023. As the employer (yourself), you can make an additional profit-sharing contribution of up to 25% of your compensation or net self-employment income. Withdrawal rules are very similar to IRA. Investment options are a wide range of mutual funds, stocks, bonds, ETFs, and more.
Start Roth IRA
I also started Roth IRA on top of the solo 401(k). Every year, you can contribute $6,500. You will contribute after-tax money into your Roth IRA, so there is no tax deductible. But earnings can grow tax-free, and qualified withdrawals are tax and penalty-free. For example, you don’t have to pay tax for your dividends, interest, and capital gains when you take out money from Roth IRA.
Invest in money market funds
I used to save money on Chase Premier Savings, but the interest rate was 0.01% to 0.02% APY. So, I closed my Chase Premier Savings account and invest in money market funds which offer 3.94% APY. I use an automatic reinvestment plan and now money is booming by itself.
Invest in dividends stocks
I also started to invest in high dividend-paying stocks. Usually, the high dividend-paying stock is not a growth stock. So, I carefully picked and invest in it. The dividend yield is 5.5% to 13%. I picked stocks that value itself is not so great, but the return covered all of the loss. As of now, I earned around $100 monthly in dividends.
Related Post: Dividend Aristocrats List
In my case, I focused on paying off debt at first. After becoming debt-free, I started saving money. Investing and side hustling boosted my asset gradually. It depends on your lifestyle, but I saved $100k in 3 years with discipline and dedication.
Now it’s your turn! When and how did you achieve your first $100K?