How to Make Your Money Last a Lifetime and Gain Financial Freedom

Let’s be honest most of us do not know how long we will live. We could live until we’re 70 or 100 or less. Even if we use fancy mathematical analyses to crunch the numbers, …

a retirement savings jar with coins

Let’s be honest most of us do not know how long we will live. We could live until we’re 70 or 100 or less. Even if we use fancy mathematical analyses to crunch the numbers, there is no guarantee that we can accurately plan and account for anything and everything that comes up during our retirement. So, as we begin planning for retirement, we need to keep our options open and find lucrative and sustainable ways to make our money last.

Key Takeaways

  • During your financial planning process, evaluate your finances, set financial goals, create a budget, prioritize your spending, and set up an emergency fund.
  • When it comes to saving and investing, you have many options to choose from, including retirement accounts, the stock market, commodities, bonds, cryptocurrencies, and real estate.
  • To make your money stretch, consider tweaking your expenses, cutting down on subscriptions, buying second-hand goods, participating in free activities, or having low-cost hobbies.

Financial Planning Process

Before we go into specific details on how to make your money last, we need to develop a financial planning process. The goal is to set ourselves up to succeed by developing long-term financial strategies that work for us. While everyone’s journey will be different, there are a few common steps that we can take to approach personal investment goals healthily and realistically.

Evaluate Your Finances

Start with the basics by getting a comprehensive picture of your financial situation. Do you have any debt, such as car payments, student loans, mortgage payments, or credit card debt? How much money are you spending each month? How does your current cash flow look? How much are you saving and investing each month? By asking yourself these types of questions, you can better understand where you are at right now financially.

Set Financial Goals

smart goals explained

After getting a holistic idea of your current financial situation, begin thinking about your short-term and long-term goals. How much money do you want to have in your nest egg before you retire? If you are interested in becoming a homeowner, how much will the down payment for your future house cost? Make sure to take some time to set specific and realistic goals so that you can start creating a vision of where you want to be in the future and how that will look.

Create a Budget

example of a budget
Example of a Budget

Once you decide on your financial goals, it’s time to create a budget that ties back to your goals. If you want to boost your net worth, you need to know where your money is going every month.

First, evaluate your current expenses to get a general idea of how much you spend each month. Then, start categorizing them and figuring out what your expenses in each category look like, such as rent, subscriptions, utilities, and groceries. Mint is a free budgeting tool that I find helpful for tracking all my purchases in one place and setting monthly budgets.

Separate “Wants” From “Needs”

One of the most painful parts of the budgeting process is deciding what we can and cannot live without. Things I consider “needs” are housing, food, water, WiFi, etc., while “wants” are things like vacations, restaurants, new tech gadgets, etc. Part of the budgeting process involves cutting out unnecessary expenses and deciding what to prioritize in your life. If you are spending every dollar you make, then it becomes impossible to build wealth.

I typically try to limit how much I spend during the week and treat the weekends as opportunities for self-care and entertainment. Of course, that doesn’t mean I’m going all-out and blowing through all my money. However, I have a good idea of how much I’m willing to spend at restaurants, movie theaters, or local events every week because I get the most value from experiences. While it is crucial to have money in retirement, we also need to enjoy our journey. I can sit at home every weekend to save money, but what’s the fun in that?

Build an Emergency Fund

Most financial advisors recommend saving 3-6 months of your current expenses in an emergency fund in case of any unexpected events, such as your car breaking down or a loss of income. If you want to be a bit more conservative, you can save 8-12 months of cash in your emergency fund. Currently, I have about 6-9 months of expenses set aside in my savings account and contribute ~10% of my take-home pay each month.

If this amount seems intimidating, start small. My emergency fund was not built overnight but was the result of years of working part-time and interning throughout high school and college. If you are cash-strapped, put $10 or $20 a week in a savings account first and go from there. If you think that’s not worth your time, check out our article on how to invest $20 for a bit of inspiration!

Saving and Investing

A crucial part of your financial planning process is saving and investing your money. The most surefire way to increase your net worth is to invest in assets that grow in value over time. A piece of financial advice that I think about quite often is finding ways to make money in my sleep. Don’t get me wrong, I enjoy my work, but I also like the feeling of knowing that my money is going “brrr” even when I’m not doing anything.

Let’s take a look at some investment vehicles you can take advantage of now.

Retirement Accounts

Roth IRA vs 401(k)

Roth IRA  The Roth IRA is one of my favorite investment vehicles. It is a tax-advantaged retirement account where you contribute up to $6,500 a year starting in 2023 if you make less than $138,000 per year ($6,000 limit for 2019-2022). With a Roth IRA, you use post-tax money to fund the account. However, you can withdraw profits tax-free starting at age 59 1/2, making this the only financial vehicle that allows you to take all the returns.

401(k)  The 401(k) is an employer-sponsored retirement account where you can contribute up to $22,500 each year (starting in 2023) of your pre-tax income ($20,500 for 2022 and $19,500 for 2020-2021). It is a great way to reduce your current tax burden, but you will be taxed when you begin withdrawing from your 401(k) starting at 59 1/2. The consensus is to contribute at least to the limit of your employer’s matching contribution because that is free money for you.

Stock Market

The stock market is one of the best ways to build wealth regardless of how your current financial situation looks. Most brokerage firms in the United States offer fractional shares investing and no-fees trading, which means you can start buying stocks with as little as $5-$10.

There are many ways you can go about with the stock market. Some people like to day-trade or swing-trade while others like to hold stocks long term. Some prefer options or short-selling. How you approach the stock market should factor in your financial education and the time and effort you want to spend. If you are a passive investor, look into index funds or exchange-traded funds (ETFs), such as VOO, IVV, or SPY. If you are more hands-on, do some due diligence into individual companies and pick out your champions.

Commodities

An alternative to stocks is commodities, such as gold, silver, or other precious metals. You can invest through commodity ETFs, stocks and bonds of commodity-producing companies, or the physical commodities themselves. Generally, interested investors see them as an inflation hedge as commodities are highly correlated to inflation.

However, they have their risks. Because commodities typically are traded on an international scale, external economic and political events can drastically impact their prices.

Bonds

A safe and low-risk investment that people tend to invest in for capital preservation purposes is bonds, such as the U.S. savings bond. When you purchase a savings bond, you get an IOU from the government who uses the money to fund federal expenditures. While bonds have become less popular among investors due to inflation concerns, they are a great way to diversify your portfolio and get a stable cash stream.

Initially, I was highly dismissive of bonds because of my risk tolerance and age. When I first started invested, I was very hands-on with my investments and wanted to focus on quickly accumulating wealth. However, after seeing the record 9.62% interest rate offered this past year, I ended up purchasing Series I bonds through the U.S. Department of the Treasury. While the rates are slightly lower now (as of December 2022), they are still a worthwhile place to park your money while riding out the volatility in the crypto and stock markets.

Cryptocurrencies

Cryptocurrencies are a type of digital payment that runs on blockchain technology, decentralized networks distributed across many computers. Though cryptocurrencies have a long way to go before they are widely adopted, certain places allow you to buy goods and services with them. Currently, companies such as Microsoft, BMW, AT&T, Shopify, and Etsy accept Bitcoin as a form of payment.

Out of all the investment vehicles mentioned, cryptocurrencies have the highest risks and highest rewards. The crypto space is very volatile and complicated compared to stocks. Prices fluctuate widely on any given day. Depending on your risk tolerance and understanding of cryptocurrencies, the consensus is to invest 1-5% of your net worth if you are interested in crypto.

Credit Cards

Dangers of Using Credit

Credit cards give you access to money that you otherwise wouldn’t have without them, making it easier for you to overspend and drown in credit card debt if you are not careful. If having access to all these lines of credit makes you spend more than you can afford, perhaps you are better off sticking to cash or debit cards.

Cashback Rewards

If used responsibly, credit card companies will reward you generously. Many companies nowadays offer competitive cash-back credit cards that give you rewards when you swipe your card. For example, I applied for the Chase Freedom Flex back in 2021, which has 5% cashback for bonus categories and travel, 3% on restaurants and drugstores, and 1% on all other purchases.

The way I approach cashback cards is to spend only on things I already plan on buying. I do not go out of my way to spend money to “earn” the rewards. In the same way, I only buy sales items if I have a use for them and not just because they are on sale.

Small Things Add Up

There’s nothing wrong with treating yourself once in a while, but making that a daily habit costs you money that you otherwise could have invested. Instead of buying coffee or boba every day, I started making my own coffee at home and occasionally treat myself on the weekends. Instead of going out to eat every day, I try to limit myself to the weekends. Look for areas in your life where you can make some minor tweaks, such as making coffee at home or meal prepping to make your money last.

Subscriptions

If you are spending a significant amount on subscriptions every month, it’s time to start evaluating them one by one. Most of the time, you get automatically billed for subscriptions, so you may forget or not realize that you’re still paying. If there are subscriptions you have not used in a while, it may be time to let them go.

For example, I canceled my gym membership a few years ago because I was not using it enough to justify the cost. Instead, I run outdoors and use my treadmill on rainy days. I also canceled my Amazon Prime subscription earlier this year because I would only use it once or twice a month max, which I felt wasn’t worth the hefty $139 annual price tag.

Another way to cut down on costs is to share subscriptions. For example, I share most of my streaming services with my family and friends. Some of my friends have a family plan for Spotify, which is much cheaper than purchasing a subscription individually.

Alternatives

Buy Secondhand

There is often a stigma against buying secondhand goods, but there is nothing wrong with buying used items. It is a great way to save money while not necessarily sacrificing quality. Most of the time, other people won’t even notice that you bought something used.

I’ve been complimented on several pieces of my wardrobe that I got for less than $10 each at Goodwill. Not once has anyone made fun of me or thought less of me for that. If you look in the right places, you can find plenty of quality items, whether it’s clothes, jewelry, cars, furniture, sports equipment, and more. It’s also much more sustainable, not just for your wallet but also for the environment.

Buy Generic

Though brand-name goods get perceived as better quality than generic products, if you can’t tell the difference, go with the latter. Because they have different price points, you have to decide whether purchasing a brand-name product that costs more is worth it. Usually, I cannot tell the difference between brand name and generic over-the-counter medication at Target or Walgreens, so I go with the generic product. Other products you can consider buying generic include staple food products, paper products, gas, and electronic cables.

Free Experiences

The easiest way to make your money last is to have hobbies or participate in activities that do not cost money. One of the reasons why I enjoy running so much is because I can throw on my workout clothes and strap on my running shoes and I’m good to go. There are many free things you can do that are fun and exciting without sacrificing your standard of living.

Outdoors

Go to the Library

When I was younger, I used to go to the library every day over the summer because it was free. I would read books together with friends or play games on the public computers. I often borrowed CDs to bring home to watch with my brother as well. Though I have not been to the library in a long time, I still have many fond memories there.

Spend the Day at the Park

One of my favorite memories from when I traveled alone in the past was going to a park in Prague, where I ended up taking a nap while lying on the grass for several hours. Having some time alone to relax and take a breather gave me peace of mind and helped me power through the day. Even now, I enjoy hanging out with friends at parks and chatting for a few hours or having a small picnic. If you’re tight on money, plan a potluck or a picnic at a local park.

Head Out to the Beach

If the weather is nice out or there’s an event at the beach, take a couple of hours to relax at the beach. In the past, I have been to Corgi Cons at the beaches in both San Francisco and Los Angeles, which were completely free and super fun. I got to pet a ton of dogs and watch them participate in fun events all day. I’ve also had bonfires at the beach with friends or just hung out there on lazy days.

Go Hiking

When you want to do something active but do not want to spend money, consider going hiking. There is often a range of different hiking trails nearby you can try out on no matter where you live. In my city, many hiking spots are a walk or bus ride away from my house. It’s a great way to get some exercise in and experience the outdoors.

Indoors

Boardgame Night

When I was in college, my friends and I had regular board game nights every month. We often played games like Catan, Exploding Kittens, Avalon, and One Night Werewolf. It was a great way to get everyone together and have some friendly competition.

Movie Night

Sometimes when my friends and I do not feel like going out or want a more easygoing night, one of us will host a movie night at our house. I love watching movies when I’m bored, but it’s always more fun with company.

Potluck/Cooking

Another budget-friendly activity is hosting a potluck or cooking together with other people. Going out to restaurants or ordering takeout adds up over time and is probably less healthy for you. A way to make your money last longer is to share your food expenses with others. For example, I’ve done Friendsgiving a couple of times with friends where we all brought food potluck-style.

Multiple Streams of Income

The easiest way to have enough money to last for the rest of your life is to develop passive income streams aside from your full-time job. There are many side hustles today that can make you a ton of money. Side hustles to consider include: starting a business, consulting, starting a YouTube channel, dog walking, freelancing, producing written or video content, and more. If you are investing in the stock market, look into dividend reinvestment, which is a great way to build passive income for retirement.

The Bottom Line: Make Your Money Last!

We’ve laid how a comprehensive guide on how to make your money last. If you want more specific tips, look into a book called How to Make Your Money Last The Indispensable Retirement Guide by Jane Bryant. In the book, personal finance expert Jane Bryant details everything you need to know to make your retirement savings last a lifetime.

Additionally, you can reach out to a financial planner to help you make the right financial plan for yourself. If you need a bit of motivation, talk to your partner, friends, family, coworkers, and mentors about ways to plan for retirement and have enough to last for the rest of your life. In pursuit of financial freedom, make sure to take care of your health and have fun along the way!

We are not financial advisors. The content on this website and our YouTube videos are for educational purposes only and merely cite our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. Always remember to make smart decisions and do your own research!

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