Retire at 40: A 24-year-old in pursuit of financial freedom
The way Thomas Frank looks at it, everything in his young life has been leading him to get better at controlling his finances. In high school, he saw a cool video game he wanted to buy — no, had to have. It took him three weeks to earn the $350, but he actually spent it buying cool clothes and hanging out with friends instead.
His Key Takeaway…
You can have money or you can spend it — but you can't do both.
All the fun times he had being social at the expense of saving money added great happiness to his young life; but when he went to college, he realized he barely had any savings left. Again, he came face to face with the reality that money spends easily, very easily.
Student Loans Weighed on Him
He pursued a degree in Management Information Systems at Iowa State University and paid his way through college thanks to a combination of part-time jobs on campus, a few scholarships, money saved from internships, freelance web design contracts and his blog, CollegeInfoGeek.com.
And despite all that effort, he still needed a student loan to complete his degree. Although it wasn't as much debt as some of his fellow students carried (less than $15,000), it weighed heavily on him.
The Intrigue of Financial Freedom
Remarkably, though, he graduated in 2013 (just after the Great Recession) with no student debt — a testament to his desire to gain better control of his financial life.
The reason is that, while in college, he began to read about personal finance. He devoured books by Robert Kiyosaki and our own J.D. Roth, as well as GetRichSlowly.org and other personal finance blogs.
What caught his interest most were tales of people like Chris Guillebeau, Colin Wright, Steve Camp, and others who traveled the world, free as birds.
The thought that people, young people even, could reach a point in their lives where they could do anything they wanted (“crazy things,” to use his term) and not be concerned about money, inspired him. It wasn't the travel, necessarily. It was their freedom, their complete financial independence that gripped Thomas.
That's what he wanted; but to reach that goal, he would need to exert even more control over his finances. And by his own admission, that wasn't his strong suit, so he looked for solutions that would eliminate the temptation to use his funds. Naturally, he turned to technology to help automate managing his money.
Here's what he did …
Automating Payments to Achieve Budget Goals
Thomas doesn't keep a strict budget. He drew one up, but found it just wasn't in his makeup to watch every penny. Instead, he decided to focus on the big numbers and worked his way down to smaller amounts.
Mathematically, the largest number was his income. He realized that finding ways to increase his value would allow him to raise his income in the future. Pursuing a college degree was that kind of investment. But he was satisfied with the progress of his online business to help him get out of debt, so he looked next at the big expenses in his life.
- Based on those numbers, he set a goal for how much he needed to set aside every month, first to get rid of the student debt, then to save.
- To minimize rent and utilities, he moved in with friends where his rent would be minimal.
- For wheels, he stayed with a low-cost, used car.
As he put it, he's not super-frugal like Mr. Money Mustache and others; but his mother taught him how to live frugally, and it helped that Iowa is not an expensive place to live.
See if your state is among the best states to save money and get ahead.
When he was still in college, the urgency to pay off that debt added motivation to set a goal and stick to it. But once the debt was paid off, the habits he formed allowed him to continue setting money aside, only now it was to start adding to his own saving account, not to pay back his debts.
Automating his payments was the ultimate solution for Thomas. He scheduled the money to be taken out of his account the day after he gets paid. Of course, there were a few months when he wasn't able to meet his savings goal. Rather than becoming depressed or going to major recovery mode, he simply shrugged off those occasions as aberrations and maintained a forward-looking focus to maintain his momentum.
Life After Debt — Thomas's Best Tips for Saving Money
With the student debt paid off, Thomas turned his attention to becoming financially independent. Now, the focus of automating his finances is saving. He still uses the same system to make it more of a hassle to free up money for impulse purchases, like an impromptu video game or concert. The trouble of accessing his funds is worth it in the event of a genuine emergency, but not if he wants to make a purchase on a whim.
It's a system he devised after an honest assessment of his strengths and weaknesses. Here is his philosophy and strategy for saving money and getting ahead:
1. Maximize income and invest in things that can increase income further.
2. Set an expense budget.
3. Calculate the difference between income and expenses. Then set that amount aside at the beginning of the month and transfer it to your online savings account.
4. Automate the process as much as possible to remove the temptation to deviate from your goals.
His ultimate goal is to reach his point of financial independence when he turns 40, at which point he plans to retire, i.e., enjoy the financial means to do anything which grabs his fancy, without regard to whether it adds revenue or not.
What's your retirement goal? Tell us how you're saving for retirement in the comments!