Money habits that made me debt-free and on track to retire by 45

Money habits that made me debt-free and on track to retire by 45

In 2012, fresh out of graduate school, I spiraled from being optimistic about my future to feeling constantly anxious about money. I had recently moved to Washington, D.C., with a $40,000 starting salary, almost $45,000 of student debt and very little savings. 

I used an interest calculator and learned that if I continued to make only the minimum payments on my student loans over the course of 10 years, I would pay $16,000 in interest on top of my original debt.

My heart sank, but I was determined to improve my situation.

Within three years, I paid off my debt, and the next year I doubled my income. In 2017, I bought my first home before my 30th birthday. In 2019, inspired by my experience, I started a company called Beworth Finance to help others build wealth and gain confidence about their finances.

Today, at 36, I’m on track to retire by 45.

Here’s how I changed my money mindset and got rid of my financial anxiety for good.

I started with small but powerful changes

Discovering that interest calculator was a huge turning point for me because it jumpstarted my financial education. I became excited about investing and eventually buying a home, but wanted to tackle my debt and build up savings first. 

At the time, I made about $2,492 per month after taxes and deductions, and before monthly debt payments. While I couldn’t reach all my goals at once, a few small habits helped me slowly and consistently improve my finances.

  1. I started saving. At first I set aside about $120 per month. I contributed just enough to my retirement fund to meet my employer match, which was 4% of my salary at the time, so about $133 per month.
  2. I made sure to negotiate my salary every year. While I may not have gotten a “yes” or the exact number I pitched every single time, I was often successful, and landed a few 15% to 20% raises over the years. Four years after I took that first job, I doubled my income to $80,000/year.
  3. I found ways to earn more outside my 9-to-5. I increased my earnings by working a number of side gigs that included mystery shopping, participating in focus groups and flipping items on Craigslist. 
  4. I slowly increased my debt payments. Every month I was able, I made additional small payments on my debt. As my income grew, I increased my extra debt payments up to $1,500 until I was debt-free. That process took three years.

I used automation to reduce my financial stress 

Turns out, it wasn’t just having debt that made me anxious — it was feeling like I had no control. So as I got more confident with money, I turned to technology to help with the goals I stressed over. 

I automated my savings contributions, put my loans on autopay and began investing using a robo-advisor that selected and managed my investments for me.

Over time, these contributions became an afterthought. Technology helped me reach my goals more quickly thanks to added benefits like higher interest rates for savings and reductions using autopay. Once I was debt-free, I reallocated those funds toward saving for a home by simply updating the same automations I set years prior. 

That simple system of automation ultimately helped me accomplish one of my biggest goals: homeownership. In July 2017, I bought my first home in Washington, D.C., a 514-square-foot one bedroom, one bathroom apartment, for $345,000, with 10 percent down. 

I avoided lifestyle creep

As my income grew to include a six-figure salary, business revenue and rental income, I’ve spent more on things I love, like travel, but have kept other expenses low. 

For example, I lived with roommates for two years even after paying off my debt, in order to save for my first home. Today, I still cook most nights, and I haven’t owned a car in 10 years. 

I still monitor my variable spending so I can continue to invest in the stock market, but do so in a way where my money doesn’t feel stretched day-to-day.

I invested in my future 

Last year, I invested over 45% of my income, a big jump from when I only invested about $133 per month. Now, in addition to maxing out my 401(k), I max out an individual retirement account and invest everything else in a taxable brokerage account, mostly in index funds. 

If I never contribute another dime to my retirement, I’m on track to have over $3.7 million by age 65. I still invest aggressively because I want to get there sooner. Assuming a 7% annualized return, I currently plan on retiring by 45 with about $1.7 million.

It’s also okay if things change along the way. 

In the personal finance industry, many people define financial freedom as when you can afford to retire. My view is a little different. I found financial freedom when I took control and automated that first extra debt payment. 

Ultimately, while more money is helpful and it certainly can bring security, it’s these small habits that truly gave me confidence, then and now. My financial anxiety is a thing of the past, and that, to me, is true financial freedom. 

Kimberly Hamilton is the founder of Beworth Finance, an Accredited Financial Counselor and the author of “Building Wealth on a Dime.”

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Money habits that made me debt-free and on track to retire by 45