Committing to achieve financial independence; that seems like a strange title to me. I would assume that everyone would want to achieve financial independence. To be free of all debt, to have enough money to live on, to not wake up to an alarm clock, to lay on a beach for two weeks straight if you want; I have always wanted to achieve financial independence. However, I am realizing that I have not always taken the right steps to achieve it. While I have been reading financial books and blogs for years and tracking my budget (I now have 10 years of data!), I have made some financial blunders along the way. I bought too much car at my last purchase and my personal financial hole seems to be spending too much eating out.
Reading the financial books and blogs and tracking my budget has helped me make progress towards financial independence during defining period of my life. I moved away from home, started and finished my master’s degree, had a few different jobs (sometimes a few jobs at a time) and purchased a home. Through all of this I did not amass credit card debit or take out loans on things I could not afford. All of this experience and study has given me the head start I needed for now – starting off my married life on the right foot.
Before we got married, my husband and I discussed finances and our future. (I highly recommend this so you understand the bias you each have towards money and wealth.) We both dislike debt and want to have a life where we have more freedom and choices. We decided to do the Dave Ramsey Financial Peace University lessons together and found easy to follow steps. We are almost done with the lessons, however, each lesson is so jammed packed with information we may go back to a few for review. We are following the Seven Baby Steps outlined in the lessons.
The Seven Baby Steps
- Save $1,000
- Pay Off Debt (expect for your house)
- Save 3-6 Month Emergency Fund
- Invest 15% in Your Retirement Accounts
- Start Saving for College
- Pay Off Your House
- Start saving for investing, wealth building and giving.
We are currently doing steps #2 and #3, thankfully our only debt is one car loan and the house. We should have the car paid off and the 3-6 months emergency fund saved by the start of summer 2017. Once we have completed those steps we will increase our retirement account contributions to 15%. In preparation for this, we have realigned our existing retirement savings allocations to Dave’s suggested mix (he is the millionaire after all!). Once we have finished with steps 1 -4, we will have a great base for our family.
This is where we will be deviating from the steps and creating our own path. Personal wealth is a personal and unique process and while we are tempted to follow the seven baby steps to completion, it is not the right path for us. I know, I know, Dave expressing recommends against this!
We are interested in creating multiple streams of passive income as fast as possible. We want to have more options by the time we have kids. Personally, I have never dreamed of being a stay at home mom, I’ve always assumed I would want to keep working. Lately though I have been thinking that being a part-time stay at home mom may suit me. I still want to be in the work place and advance my career, but not miss the young years of these future children! So, since we are not sure what we are going to want to do in the future, we think it is a smart idea to create more options for our future selves. To do this, we will be purchasing rental properties to eventually create passive income.
This leads me to blog I have discovered Paula Pant’s blog AffordAnything, “you can afford anything but not everything”. To extremely simplify her message, we need to mind the gap – increase our income, decrease our spending and save/invest the rest, known as the gap. She recommends identifying your passions/desires/goals and then align your finances accordingly. Such as, if you want to travel the world, like she has, you should stop wasting money buying lunch at work (I’m working on that!) and start a savings account for travel. She also writes a lot about rental properties, which is one of her streams of passive income. It’s a fabulous blog that has helped inspire me to be more aggressive with our plans
That is our plan; pay off the car, save 3-6 months in an emergency fund, save 15% of our income to retirement and then purchase rental property to have a passive income source. The path to financial independence is not one-size fits all process, which is why we are combining concepts. We are currently paying down debt and shoveling money into savings. And we are still working out all of the finer details on this plan, but I am happy to report that we have the framework established!
So, if you are looking for us, we will be cooking fabulous meals at home with ingredients from our garden, going on bike rides and taking romantic walks. Because we are on a mission to save, save, save (and invest) to make our dreams (whatever those may be) come true!
What is your plan for the future? Are you working to achieve financial independence? Do you have passive streams of income? What are they? I would love to know what you are working on!