The Business Insider reports.
After her divorce, Lakisha Simmons felt financially unstable and began looking for solutions.
She read books and learned how to save and invest in retirement and brokerage accounts.
She went on to put her new knowledge into practice and is now on track to become a millionaire by 2022.
In 2017 Lakisha went through a dramatic financial change after her divorce. It led to her becoming a single mother of two 10-year-old children. She didn’t want to move, so she kept her marital Home in Nashville, Tennessee, but had to pay the mortgage with her single income.
Concerns about being able to keep paying her bills prompted her to seek a solution. Regardless of how old she decided to retire, Lakisha wanted to know how to reach wealth freedom. To her, wealth freedom means having enough savings without worrying about a paycheck.
Lakisha, founder of Six Sigma Black Belt Brave Consulting and associate professor of analytics at Belmont University, said. “The financial insecurity weighed on me and I didn’t want to be in a situation where I couldn’t take care of myself, like what would it take for me to just survive on my investments?
Within four years Lakisha had reached her goal of financial independence. With $750,000 in savings and investments, she can always make ends meet with just her investments (although she doesn’t plan to quit her job at this point, she still enjoys it). She gains peace of mind from knowing the stability of her finances.
She shares the following steps that helped her reach her goals.
- She started reading personal finance books
Lakisha started her journey with only a limited knowledge of personal finance. She began reading blogs, articles and books on the topic until she found the right solution.
Her favorite resources were Mr. Money Mustache and The Millennial Revolution, two bloggers, because they explained in simple steps how to become wealth independent. She picked up some key tips, such as how to use money to retire early.
- She sold her house
Although she loved her home in Nashville, she soon realized it was the biggest unnecessary expense. Shakisha decided to sell her 5-bedroom house and move into a 1,000-square-foot (28 ping), two-bedroom apartment. This move allowed her to save $12,600 a year on her overall housing expenses. She invested the proceeds of the sale in a brokerage account, where she maintains a diversified portfolio.
- Track expenses
Lakisha uses three tools to track and plan her spending. First, she creates a spreadsheet to calculate her expenses for the year. The chart is a way to pre-plan how she will divide her income into spending, saving and investing.
Then she uses a budgeting program, Mint, to track actual transactions each month. This works to show how she spends each moment, and can reflect whether that spending is worth it.
Finally, she signs up for an account with Personal Capital to help her track her net worth.
- Seeking ways to reduce monthly bills
Lakisha revisited all of her monthly bills to find ways to reduce her spending. She cut out the things she no longer needed and found affordable options for the products and services she did need.
She gave up cable TV and saved $1,440 a year. She switched her cell phone plan to Mint Mobile, which offers adjusted rates and saves her $1,620 a year. And she also adjusted her insurance policy to a more affordable monthly payment, and she even changed the grocery stores she shopped at to avoid the higher-priced chains.
- Start adding to your tax-advantaged retirement account
Lakisha began maximizing her employer-provided retirement fund 403(b) and then learned about another option offered by her employer, a 457(b) account, which was a tax-advantaged deferred compensation plan that would allow her to contribute pre-tax dollars. Once both employer-sponsored accounts are exhausted, the remaining available funds will then be transferred to a Roth IRA.
Because of her savings, she is able to put about 33% of her income into a retirement fund.
- Start contributing to a brokerage account
When Lakisha was satisfied with her ability to contribute to her retirement fund, she began to put money into her brokerage account through Vanguard. Her investments are a mix of index funds and exchange-traded funds, which keeps her portfolio diversified. She doesn’t put in a specific amount each month. Instead, she aims to invest whatever amount is left in her budget.
Lakisha told Business Insider, “To achieve financial independence, I just needed to change my mindset from spending and saving money to investing. Since investments are growing so quickly, it’s far more than I’ve been able to save over the years. “
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