How to Retire Early Making Under 6 Figures (video)
Divorce inspired Jackie to learn about money when she realized her husband had saved more than she did. As a single mother and starting off with $20,000 and she is now an early-retired millionaire.
Here is her full interview. Here are some of our takeaways from her talk:
Tracking Net Worth
Jackie said if there is anything she would’ve done differently is understanding her net worth early on. Ideally, you want to increase your income while decreasing debts.
Traditionally, people think about earnings as what you would get paid at your typical 9-5. However, these days anyone can make money through multiple side hustles. There are so many different avenues of making money you just have to find what works for you. From starting a side hustle to investing in real estate.
When it comes to savings, don’t be overwhelmed, you can work your way up to saving a larger percentage.
Jackie was never a huge budgeter, but she realized that she was better at decreasing certain debts over other ones, and that is okay! In her case, it didn’t make sense to pay off her mortgage right away because the interest rate was so low, so she focused on other debts.
If you have student loans, right now is a great time to focus on paying other debts you might have since the interest rates are not accumulating because of COVID relief (when you log into your Snowball account, you’ll be able to see which loans have COVID relief)
Have a Retirement Plan in Place – You Can Start With the 4% Rule
How the 4% rule of thumb works:
Let’s say you have a million dollars- The 4% rule states that you should be able to take out 4% of that million dollars, and it should last you a little over 30 years. 4% of 1 mill is 40k a year, so that would mean that 40k is your living expenses.
Some people might want to retire early and will need it to last more than 30 years, so if that is the case you can drop it to 3 or 2%. She suggests figuring out your sweet spot by using a free online retirement calculator, like the FIRE calculator.
Further reading: What is the FIRE community?
Take Advantage of Tax Benefits
After seeing how little she was paying in taxes, she realized that there are so many ways to take advantage of this:
“I like sharing this advice because this is something most people forget about or simply don’t know. You have control over how much you get taxed and there are some smart ways to decrease your taxes. It’s money you can save fairly easily so don’t push this one to the side! A huge contributor to getting my taxes lowered is maxing out my 401k. The important thing to note is that I did a traditional 401k, and this specific account will lower your tax rate.
When people ask me what I prefer, traditional or ROTH, I like to let them know I like to use a mix of them because it gives you flexibility.”
So many people are scared of investing, but it’s not that hard once you just get started. Compound interest is so powerful. Even if you have a couple of hundred dollars, just get it started.
Jackie recommends starting with an index fund, such as the S&P 500. That way you are not limiting yourself to owning shares from one single company.
If you’d like to connect and stay in touch with the Jackie, here is her contact info:
If you are interested in thinking about buying a home, check out our Buying a Home 5 day email course here.