Is Financial Freedom Really Attainable for Millennials?
Maybe not everyone is cut out for a salaried office job. Maybe your dreams involve traveling and working abroad, launching your own start-up, or being self-employed. If you have student loan debt, you might think those dreams are impossible.
But your student loans shouldn’t doom you to a lifetime chained to a job you dislike. Here’s a look at the steps you can take to make your independent life goals achievable.
Do the math
How much money do you really need in order to make your dream happen?
If you want to be completely financially independent, the general advice is that you need to save about 25 times your yearly expenses to retire early.
But let’s get real. If you set too high a bar, you may never have enough to pursue your dreams.
A more realistic strategy is to save enough to live on for six to 12 months. This involves taking a close look at your expenses and determining a realistic figure that will cover your housing, transportation, food, utilities, loan payments, and other expenses.
Use savings apps to record everything you spend for a week or a month, figure out what you spend every month, and find ways to save.
Start saving aggressively
Once you’re not tethered to a salaried job, your savings account will be your safety net. The faster you can build up your savings, the faster you can start pursuing your dreams.
Sure, you can cut your daily latte habit and save money—and that would be a smart thing to do. But you’re more likely to make real progress on your savings if you re-evaluate your biggest expenses. For many people, those include things like housing and transportation.
There are many ways to save money on those—for example, moving in with roommates or selling your car and biking to work. Measures like these might seem extreme—and wouldn’t work for everyone—but sometimes big goals require big sacrifices.
Kill off your debt
If you have debt, now’s the time to take a look at how you’re paying it off—and whether you could be doing so more strategically.
First, tackle your credit card debt. High-interest credit card debt both hurts your credit score and drags down your finances.
Paying your student loan off quickly may also be the way to go—if you can do that in the next year or so, while also putting money toward savings. For many people, however, paying off that loan will take many years, even if you put all your extra money toward it.
If that’s your situation, you may be better off refinancing your student loan for a lower interest rate. Having a lower monthly payment means you could build your savings up more quickly. You could also save thousands over the life of your loan, which is a good idea whether you’re looking to ditch your day job or not.
Don’t rack up more debt
You need more than a large savings account to cut the cord on your day job. You also need as few financial obligations as possible. Avoid putting significant expenses on your credit card, and try to avoid any major purchase such as a home or car.
If you do need to make a big purchase while you’re preparing for independence, consider lessening your debt by spending less on that purchase than you can afford.
Everyone’s financial goals are different—and the specific steps you should take depend on your situation, the type of debt you have, and what you want to achieve.
It makes sense to do more research into what it takes financially to achieve the goals you have. Find online communities of people doing the same thing. Sign up for daily newsletters to help you stay on track. Find people who’ve been successful doing what you want to do, and talk to them about how they did it.
Refinancing your student loans can help you reduce your debt burden—and get you closer to financial freedom. Check out our Student Loan Refinancing Calculator to see how much you could save.