How to Achieve Financial Freedom in 5-10 Years
People who want financial freedom fast have to come to terms with one very important fact:
To achieve financial freedom in 5-10 years, you have to save the majority of your income.
This can mean as much as 80% of your after-tax earnings, depending on how much you make. That’s not exactly chump change.
So here are our best tips to make that happen.
The Math Behind Financial Freedom
Calculating how much you need to save to achieve financial freedom in 5-10 years isn’t complicated.
Let’s assume that you put your money into a mutual fund that averages a 5% return, compounding monthly. The average American consumer spends over $6,000 per month on expenses, but let’s assume that since you’re serious about financial freedom, you can live on half of that. This means that you need to save $720,000 total.
A simple compound interest calculator shows the following:
- To achieve financial freedom in 5 years, you need to put in $10,600 per month
- To achieve financial freedom in 10 years, you need to put in $4,650 per month
As you can see, achieving financial freedom in 5-10 years is challenging, but not impossible. It requires discipline and intentionality, as outlined in the following steps.
1. Examine your finances in detail.
To save at this level, you need to examine your finances in detail, set a budget, and stick to it. Impulse purchases, endless subscriptions, eating out, and even some groceries, those are now a thing of the past—until you reach your goal, that is.
2. Pay off your debts.
A major source of liability for most American consumers comes in the form of debt. As you work toward financial freedom, pay off your student loans, credit cards, and even your car. That way, even more of your income can go toward your savings goals.
3. Increase your income.
While cutting expenses is important, it probably won’t be enough to reach those numbers we mentioned earlier. This is why you need to also increase your income. Many experts recommend at least seven sources of income—but you don’t have to build these up overnight. Start with your full-time job, then take on side hustles, then consider other sources like real estate or similar investments.
4. Invest strategically.
Part of achieving financial freedom in 5-10 years involves choosing investments that will provide the best return over the long run. This can include everything from your 401(k), IRA, mutual funds, and even cryptocurrency and NFTs. Find a financial advisor who can help you diversify and maximize your portfolio.
5. Save the majority of your income.
If you want to reach financial freedom in 5-10 years or less, your savings rate is going to need to be astronomically high. So as you increase your income, don’t fall into the trap of adjusting your expenses to match. The more you save, the faster you’ll get to your goal—and the more you’ll have to work with once you get there.
While you’re working toward financial freedom, don’t leave your employer 401(k) match on the table—this is free money that can help you get to your goal faster! Use the calculator below to see how Matchly can help you claim your match today.
How Matchly can help you achieve financial freedom
Matchly helps you get all of your 401(k) employer match without taking a cut out of your paycheck and achieve financial freedom faster.
Kickstart your retirement savings.
Get up to thousands of additional dollars every year from your employer and kickstart your retirement savings.
Enjoy your full paycheck
Matchly finances your 401(k) contributions for you, so you don’t have to take a cut out of your paycheck to get your match.