Saving

I turned my side hustle into a 6-figure job and now I'm on track to retire by 40

How to FIRE co-founder Samantha Hawrylack shares the steps she's taking in order to retire by 40.

How to FIRE co-founders John and Samantha Hawrylack.
Courtesy Samantha Hawrylack

In 2019, I paid off $60,000 of student and auto loan debt and reached a FIRE (financial independence, retire early) milestone called CoastFI. For those who aren't familiar, CoastFI means that you have enough money saved in your retirement accounts that, if you never saved another penny, you would still have a comfortable retirement at a traditional retirement age, like 65.

My husband John and I reached this CoastFI money goal by the time we turned 25, and we aren't stopping there. Our take is that everything we do from here on out is only an improvement. Every dollar we save buys us more freedom and flexibility in our lives in the form of time.

The more time we have, the more we can live our life on our own terms. Like last year, when I leveraged our financial position to quit my 9-to-5 job to turn my side hustle, my consulting business, and the blog How to Fire into a full-time gig. I went on to make six figures during my first year of self-employment. 

Now, through a series of strategic money moves, we are on track to retire in 15 years, by the time we are 40. Here are the five steps John and I have taken to pursue financial independence and early retirement.

1. We live within our means

We have grown our income substantially since we graduated from college. In 2015, John and I made $73,000 combined while we were working and in school full time. But in 2020, we will earn over $200,000 combined. This is a significant increase over the space of five years, but we have never allowed lifestyle creep to influence our money and spending habits

When we got raises, they never resulted in unnecessary purchases or an inflated lifestyle. On the contrary, we always up our savings rate with an increase in income.

We live well below our means so that we can continue putting as much into savings as possible. 

To make this easier, we budget only on John's income so that all of mine can be saved. We pay ourselves first and monthly savings deposits are a line item on our budget just like any other bill. The deposits are automated into our accounts. That way, we aren't tempted to splurge on unnecessary things.

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2. We build up more liquid savings

Those familiar with Dave Ramsey's Baby Steps might know that he recommends saving 3-6 months' worth of expenses in an emergency fund that is not invested in the market. We started with this benchmark while we were still in college and have expanded upon it since. 

Our plan is to have several years' worth of expenses in a high-yield savings account that we can utilize when needed in early retirement. This also will allow us to control when we pull from our retirement accounts, so we'll never have to sell when we're not ready to.

We'll be able to take money out of our retirement accounts before age 59-and-a-half through method called the Roth conversion ladder. We'll move our money from tax-sheltered accounts like a 401(k) into our Roth IRAs. Then, after five years and before we turn 59-and-a-half, we can withdraw these funds, penalty-free.

3. We contribute the max to our retirement accounts

We are currently contributing the maximum amount to a 401(k) and i401(k), as well as two Roth IRAs and an HSA. 

We contribute to a 529 for future children and put money away into a high-yield savings account for emergencies, sinking funds, and extra retirement savings as well. All together, this totals over $80,000 per year.

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4. We use self-employment to our advantage

One thing that I have learned is in the last year is that there isn't a limit to your earnings potential as a self-employed person. So much of side hustle success is predicated on the time you devote to it. And staying focused on our business goals has positively affected our personal financial goals. 

I am always looking for ways to bring on new clients as well as expand the work we do with our current clients. The more we earn, the more we can save and invest, which in turn helps us reach our early retirement goals. 

There isn't a limit to your earnings potential as a self-employed person.

5. We grow passive income streams

Over the past couple of years, we have put our focus on building income streams, both active (our client-facing business) and passive (with the blog). How To FIRE is growing, and with that growth comes more passive income from ads, affiliate marketing, and product sales. 

Right now, we are investing all of our earnings to grow the business in hopes that one day it can be a substantial income stream. In the future, we also plan to purchase rental properties to further our passive earnings.

We track our progress monthly, and these steps are getting us incrementally closer to early retirement. We're confident that these money strategies will get us what we have always wanted: The freedom and flexibility to live life as we choose.

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.

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