We also got serious about paying off our debt.
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We'd been married less than a year and were still figuring out how to merge our finances, communicate about spending habits, and work together to win with money. When we returned to Boston, graduate school student loan interest had just kicked in.
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We craved the financial freedom of planning for our future together and actually getting to keep our paychecks. We spent the next two and half years attacking our student loan debt. What we didn’t realize about this move was just how much it would teach us about personal finance. We married at age 25 and moved to Sydney for my job at HubSpot. “My husband and I are a 20-something couple of Midwest transplants living in Boston. My fellow HubSpotter Lauren Hintz decided to work on liabilities first and tells her story like this: How one couple paid off $93K in 30 months For many of us, accrued student debt from attending university is one of our biggest liabilities. But which comes first? Everyone is different - and I don’t want to give specific advice - but once you know what you owe and what you own, you can decide which is more important to focus on first. The next step is to increase your assets and decrease your liabilities. The great news is when earn exceeds burn you’ve achieved financial freedom. Earn rate: How much money do you receive from your investments (i.e., income-producing assets) - not including the income from your job.Burn rate: How much money does it cost for you to live your life annually?.I like to point people to two basic factors important in planning: the earn-to-burn ratio. Or use a handy net worth calculator like this one from Bankrate. Liabilities are what you owe - think rent, mortgage, credit card debt, or student loans.Ĭreate a personal net worth statement in a Google Doc or spreadsheet - and start tracking. Your personal net worth is a combination of:Īssets include what you own, like a house, investments, or cash in the bank. How to Achieve Financial Freedomīegin by understanding your personal net worth. Remember, this type of financial independence takes some level of personal responsibility and self-discipline. So, I’ve sourced two industry experts who’ve spent years researching and defining the right steps to take and are willing to point you in the right direction. What does this tell us? Most Americans need help achieving financial freedom in the short- and long-term. The average worker leaves for retirement with only three times their final years compensation in their 401(k), but experts say you need 6 to 12 times that amount. Here are some alarming 2018 retirement savings statistics from Northwestern Mutual: How much does the average American have saved for retirement? Understandably, this left a lot of people confused about how to set up and contribute to their 401(k). This move, however, presented a new problem: workers were never educated in personal finance and were suddenly left to themselves to figure it out. Once 401(k) plans became commonplace, employers shed pension plans almost entirely.
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Prior to this unveiling, most people had company-sponsored pensions. The whole notion of retirement funding changed in 1978 when the government launched 401(k) plans. It is also characterized by a lack of debt.ĭo most people achieve financial independence? Regrettably not. It is often spoken of as “retirement savings” and is usually achieved through saving, contributing to a 401(k), and investing. Financial freedom is the ability to pay for your lifestyle through the rest of your life without relying on a regular salary or wage.