Once I’m able to get somebody to a point to where they tell me what their real financial goal is, (not the financial goal that they think they should have because it’s “responsible)”,the majority of the time it’s, “I want to be in a position in the next three to five years to do what I want to do.”
A lot of people are in the position that they’re in at their job (or even in their business sometimes) because they have bills they have to pay.
They have gigantic student loans, car loans, a mortgage, etc. They also don’t have a lot of liquidity (money that’s accessible without penalties).
Many feel trapped doing a job they have to do because it provides them the income they need to maintain their current lifestyle. So, I get them to rethink their plan.
Step 1: If your most important goal is to quit your job and do something you want to do in 3 to 5 years, stop investing so much money into retirement accounts that lock your money up until age 59 and half (unless you will be 59 and half in 3 to 5 years).
Step 2: Create a plan to eliminate all of your debt using the debt snowball technique (See: “What’s a good strategy for getting rid of my debt?”). It’s not uncommon to be able knock everything out excluding your mortgage in 3 to 7 years, but you have to be disciplined.
Step 3: If you’re really serious and want to really speed up the process, find a side hustle to make an extra $150, $250, or $400 or more per week and use ALL of that money to reduce your debt (See: “What’s the best short term investment for making money now?” for side hustle ideas).
Step 4: While you’re paying off your debt, use the money you were investing in retirement accounts to start building up a reserve fund that holds one to two years of your expenses. This doesn’t have to be in cash. You can create a conservative investment account that’s a non retirement account (meaning the money is available to you without penalties). Once you’re debt is all paid off, finish filling up this bucket.
That’s it. It’s not an easy plan to follow. The good news is it should only be really hard for 3 to 5 years.
You can choose to keep not liking what you’re doing for the next 10, 20 or 30 years (which is hard too), or you can suck it up roll up your sleeves and be real disciplined for 3 to 5 years.
You’ll pick up some good money habits along the way that will stick with you for the rest of your life.
It’s your choice.
Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.