A mother-of-two has shared how to successfully save and get on track for a wealthy retirement, saying it can be achieved in just four steps.
According to Holly Johnson, 43, she and her husband started taking their finances “seriously” when they were in their twenties.
While they worked hard to cut back on certain things and lived “intensely frugal lives” to pay off “every penny of debt” they owed, there were other financial burdens they hadn’t considered.
“We never think much about what happens next, or how our attitudes about money might change dramatically as we get older,” Holly, of Indiana, wrote in an article for Business Insider.
According to Holly Johnson, 43, she and her husband started taking their finances “seriously” when they were in their twenties.
According to the credit card expert, both she and her husband became self-employed and began earning more money as their careers progressed.
“Now that I am 43 years old, I can say with certainty that we are financially independent and on track to retire rich when our children leave home in seven years,” he said.
Earn more money however you can
Holly’s first lesson is to make more money, and you may have to think outside the box about how to do it.
“No matter what anyone says to the contrary, when you have a fixed income, you can only save so much,” he explained.
‘You can reduce your (streaming) bills and start using a monthly meal plan. From there, other steps like buying a smaller home and looking into auto and homeowners insurance can only save so much.”
To save a few more dollars, Holly suggested freelancing or doing something on the side.
“If I could go back and change anything in this area, I would have left my traditional job to become self-employed as soon as possible instead of spending years wondering if I was making the right move,” he reflected.
Holly’s first lesson is to make more money, and you may have to think outside the box as to how.
Compound Interest Can Make a Big Difference
Holly said one regret she has with her finances is that she and her husband didn’t invest in their retirement fund sooner.
She said they began contributing to a retirement fund when she was in her 20s, but at that time they only contributed a “nominal percentage” of her income.
“Now that I know and understand the magic of compound interest, I wish we could have contributed a lot more than we did,” he shared.
The saver expert went on to urge everyone to start saving money regularly as soon as possible.
Holly said one regret she has with her finances is that she and her husband didn’t invest in their retirement fund sooner.
“After all, investing early allows you to start accumulating savings that increase in value over time, and compound interest eventually allows you to grow your wealth from the wealth you’ve already earned from your investments in the past,” he explained.
Holly used an example of investing the same amount of money at 30, compared to investing the same amount overall at 40.
In the first scenario, you used the scenario of investing $1,500 per month for 30 years, starting at age 30.
“If you earned an average return of seven percent, you would end the 30-year period at age 60 with just over $1.7 million,” he explained.
Holly then compared it to investing $2,250 over 20 years starting at age 40.
“Which means you’re investing the same $540,000 over a shorter term,” he said.
“With the same seven percent return, you would end the 20 years at age 60 with just over $1.106 million.”
Making a bad decision won’t set you back
Although Holly and her husband will retire comfortably, she admits that they have made some mistakes in the past and overall it hasn’t affected them negatively.
“For example, we delayed investing for retirement, as I already mentioned, we spent too much on remodeling our second home and sold it at a loss,” he said.
However, he says that over time they realized that a few mistakes will not completely destroy their financial plans.
Although Holly and her husband will retire comfortably, she admits that they have made some mistakes in the past and overall it hasn’t affected them negatively.
“In the end, my husband and I made a lot of great decisions, including venturing into self-employment, investing heavily during our highest earning years, and avoiding debt for over a decade and counting,” Holly admitted.
“While the mistakes of our past have held us back to some extent, the good decisions we have made more than made up the difference.”
Don’t overestimate mental energy
While saving money is important to Holly and her husband, she now believes time with her family is more important.
In the past, Holly said she spent a lot of her free time and energy saving money, while now she uses that time with her family.
“Now that I’m older, I prefer to spend my free time working or relaxing with my son,” he explained.
“Nowadays, I use money to buy freedom and time, the two things in life that are truly priceless.”