Published on 01-23-2020
How would you feel if going to work was optional?
Imagine for a second that you’ve saved and invested enough so that your living expenses were paid for. How would you be spending your days?
That kind of freedom sounds incredible, but for many, it also sounds impossible. However, there’s a community, growing every day that’s focused on that goal - financial independence (FI).
Though the movement has been around for decades, with pioneering books like Your Money or Your Life and popular blogs like Mr. Money Mustache, Our Next Life, and Rich and Regular, it’s now becoming more ‘mainstream’.
Recently the FI centered documentary Playing with FIRE was officially released after dozens of community-driven screenings around the country, including two in Raleigh. That documentary along with the thriving online community and books on the subject have been introducing families to how they can start crafting their path towards financial independence.
A huge part of becoming financially independent is being able to save a significant portion of your income. Your savings rate determines how quickly you can reach your goal.
What that means in practical terms for families is optimizing their budget.
While there’s certainly a case to be made for reviewing your budget line by line, for many families, time is an issue.
Which is going for the big wins with your budget can be a fantastic strategy.
Sure, going through your budget line by line can help you ‘find’ some extra money, but there are some big expenses that can make a huge difference with your bottom line.
When I was interviewing Drew Snider, who’s the director of financial planning for Coastal’s Wealth Management available through CFS1, he pointed out that for many families those big expenses include housing, transportation, and food.
Right away you can see that some are easier than others to change, so we’ll start with the relatively easy changes and work our way to the hardest.
For many families, the big hit to the food budget isn’t the groceries, but eating out.
Those lunches with coworkers, snacks grabbed on the go, and last-minute pick-ups (or deliveries - Hello GrubHub!) are in themselves fine, but when you’re doing it several days in a row and it’s both of you, it can snowball into a significant amount.
The first step you should try is first seeing how much of your money is currently going towards eating out.
Right now an American family, on average, spends around 40% their food budget eating out.
I don’t want you to completely wipe out date nights or enjoying lunch with friends. Instead, I want you to become a frugal foodie.
What’s a frugal foodie? It’s someone who can maximize their money and still enjoy a good time.
Being a frugal foodie means cooking more at home, but it’s because you mastered some basic dishes that taste as good or even better than some restaurants. Believe it or not, it’s not too hard to get to that point.
I interviewed a few local foodies here in the Triangle area who had some wonderful tips on making incredible dishes at home and getting the best deals on your special nights out.
Car payments seem to be the norm for many families. Right now the average monthly payment for a new car is $530/month; for used cars, it’s over $380.
That’s a huge chunk of money that can be used for other key financial goals.
Did you know if you redirected that $530 car payment towards your retirement, you’d have more than enough to max out your IRA’s annual contribution limit?
As you can see there’s a good opportunity to have more money in your pocket based on the car that you buy.
If you’re looking to buy a car in the near future and get a great deal, start doing your research now. Some work upfront can mean big savings when you make the purchase.
One popular way many in the FI community take with their cars is focusing on saving up enough ahead of time to buy their cars in cash.
We’ve done this for a few years and it’s been incredibly helpful and given us flexibility with our finances.
Right now we’re gearing up to get a replacement car for my husband sometime this year and we already have been researching. Since it’s going to be a commuter, we’re looking at getting a hybrid.
Using Coastal’s AutoSMART feature, we’ve been able to hone in how much we can expect to pay if we buy from a dealer in the area. Having that information on hand makes the buying process less stressful and increases the chances of us snagging a deal.
Of course, you may currently have a car loan now. What do you do then?
If you like your current car, but you want to get those payments in a more affordable spot, you may want to look into refinancing your car loan2.
As a member of Coastal, you could get some competitive rates. That money saved could then be used to tackle some of your other financial goals, including paying down debts or contributing more for retirement.
Finally, we have to talk about the biggest expense for most families - housing.
Let’s be upfront - moving isn’t an easy decision, either financially or emotionally, so it really pays to have a thoughtful plan when figuring out what is the best option for you.
You may find that selling your current place for a more convenient location with a house better suited for your actual needs could free you up financially.
If you love your home, you may see if refinancing would allow you to save some money and give your budget a bit more breathing room.
For those you who are looking to buy in the near future, this is a wonderful opportunity to work with your loan officer and real estate agent to find a house that not only fits your needs but stays within your budget.
Don’t just focus on the most you can afford. Looking at your housing as a part of your overall financial plan.
Besides the essentials like bills, make sure you have room in your budget for both financial long term goals like investing for retirement and quality of life expenses like travel.
If you’re seriously considering getting on the path to financial independence, take some time to look at these three key areas to see if you can find that balance of optimizing expenses while still enjoying the journey.
If you want a professional to work with you on crafting a path that fits you and your priorities, reach out to Coastal’s Wealth Management team! They’re dedicated to making the process less stressful and more fulfilling.
Elle Martinez is the creator of Couple Money, a personal finance podcast and site focused on helping couples get on the same page, dump their debt faster, start building wealth together
1Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS; are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Coastal Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
2All loans subject to approval.