Saving

In 5 years, I went from living paycheck-to-paycheck to saving 50% of my income: Here is my best advice

"Our first rule is that we always pay ourselves first," says How To Fire's Samantha Hawrylack.

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Samantha and John Hawrylack are the co-founders of How To FIRE.
Photo by John Hawrylack

Five years ago, my husband John and I were living paycheck-to-paycheck. Fresh out of college, we were both working long hours and barely had time for seeing our friends and family, let alone spending time with each other. 

We felt burned out when it came to our finances. It's not what either of us intended when we first got married. We knew that things had to change. 

Looking at our $60,000 in debt, we understood that financial freedom wasn't going to happen overnight. So we set a goal to retire in our 40s and committed to doing everything we could to make it happen. Within five years, we paid off $60,000 in debt, which included student loans and auto loans, and can now save 50% of our income.

Today I am self-employed, having turned our side hustles — a client-facing business called SJ Digital Solutions LLC and a blog called How To Fire that we started to chronicle our journey — into a six-figure, full-time career. We pay our monthly expenses from John's income, and any income I earn goes toward our retirement accounts and other financial goals. 

Our rule is that we always pay ourselves first. This is nonnegotiable. We know that if we don't contribute to our retirement and savings accounts as we planned, our FIRE (financial independence, retire early) plans would never work. But today, we are in our mid-20s and are on track to retire in 15 years or less. 

Here's what we did to break out of our paycheck-to-paycheck cycle.

We never inflated our lifestyle 

We went from making $73,000 a year between the two of us to over $200,000 combined today. The biggest factor that influenced this was our education and career paths, as well as a solid work ethic. John received raises and promotions each year. And when I made the move to self-employment, over time, I started bringing in 2.5 times the income I earned from my day job. 

If you looked at our lifestyle, though, it hasn't changed. We didn't upgrade our cars, buy a big fancy house, or start any lavish shopping habits. Instead, we used that extra income to increase how much we saved for retirement and contributed to our regular savings accounts. We know that we're investing in our 'future selves," so it doesn't feel like a sacrifice or burden.  

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We always contribute to our savings account 

Retirement accounts are important, but it's just as essential to hold off on withdrawing from them as long as possible. We're aware of the withdrawal penalties for those under age 59 and a half as well as Required Minimum Distributions (RMDs) starting at age 72. We will keep those in mind as we age, but we have many years until we reach that point.

For now, we're focusing on our younger retirement years, the years when we plan to enjoy life but don't want to deplete our retirement savings. Selling investments early could hurt a retirement plan. 

So we also save roughly 30% of our income in liquid savings. We make the deposits automatic every week or every month (depending on the account), so we don't accidentally spend what we should have saved or even get tempted to make such a decision. Every time we earn more money, we increase our savings percentage relative to the increase in income.

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We found our 'why' and capitalized on it

In addition to raising our income each year, we are always looking for entrepreneurial opportunities. Earning passive income is one of the best ways to grow your wealth. It takes hard work and time to get there, but we love the results, so we don't mind putting in the effort now.

We are currently expanding our offerings in freelance writing and SEO consulting. We are also working on creating other niche sites in addition to How To FIRE, and developing an online course called Fire Up Freelance about how to leave behind a 9-5 job and go freelance.  

Not being afraid to try something new — like starting our side hustles — has not only helped us earn more, but it has also helped us grow as people by showing us what we are capable of. 

If you are thinking about how you can pursue FIRE and looking to cultivate additional streams of income outside of a 9-to-5 that could potentially turn into something bigger, my best advice is to look inward. What do you personally have to offer? What are your gifts that others would love to learn more about? Your skill set and perspective are valuable, and harnessing them could create some lucrative opportunities. 

Knowing your "why" will keep you going when times are difficult. Our "why" is to pursue passions outside of a 9-to-5 job, be more present for friends and family, and travel the world. When we feel stressed or overwhelmed, we go back to our "why" to motivate us to keep going. It's hard work, but we know our hard work will pay off. 

Earning passive income is one of the best ways to grow your wealth.

We maintained a strong support system 

John and I are a team. We decided what we wanted, and now we're doing everything we can to achieve it. And not only that, it's fun having a partner by my side on this FIRE journey. 

I highly encourage you to find someone with the same goals and beliefs as you to help you reach your goal. It doesn't have to be a significant other. It can be a friend or co-worker — really anyone you trust and can work with is a great option. 

Sometimes that can even be an online community, such as the one we have cultivated for How To FIRE. Our readership has grown to over 45,000 pageviews per month and over 20,000 social media followers, including a Facebook group where everyone joins together to support each other on their FIRE journeys. 

When you're working hard to meet your objectives, just having that person by your side, cheering you on, can make a tremendous difference. 

Samantha Hawrylack is a personal finance expert, full-time entrepreneur, and co-founder of How To FIRE. She has been featured in publications like Forbes, Grow, MSN, Yahoo! Finance, and Fox Business. She's passionate about helping others reach the freedom and flexibility they crave through the FIRE movement. You can find her on Twitter at @HowToFIRE.