How a single mother reached financial independence in 6 years


In 2017, Lakisha Simmons‘ financial situation changed dramatically after going through a divorce. She became a single mother with two children under the age of 10. Simmons didn’t want to move her children, so she kept her marital home in Nashville, Tennessee, but had to pay the mortgage on a single income.  

Concerns over whether she’d be able to continue paying her bills prompted her to search for solutions. Simmons wanted to know what it would take to reach financial freedom, regardless of what age she decided to retire. For her, financial freedom meant having enough savings to not have to worry about a paycheck.

“The financial insecurity was weighing on me so heavy. I didn’t want to be in a position where I couldn’t take care of myself. Like, what does it take for me to just live off of investments?” said Simmons, who is the founder of BRAVE Consulting, a Six Sigma Black Belt, and associate professor of analytics at Belmont University.

Within four years, Simmons had reached her goal of financial independence. With $750,000 in savings and investments, she could live off of her investments at any point (though she has no plans to stop working at the moment as she enjoys her job). Just knowing she has that financial security brings her peace of mind.

Below, she shares the steps she took to help her reach her goal.

1. She started reading personal finance books

Simmons began her journey with limited knowledge about personal finance. She started reading blogs, articles, and books on the subject until she found solutions that were viable for her. 

Her favorite resources were the blogs Mr. Money Mustache and Millennial Revolution because they used simple steps to explain how to become financially independent. She took away key tips, such as how to access her funds for early retirement. 

2. She sold her home

Much as she loved her home in Nashville, she quickly realized it was her biggest unnecessary expense. Simmons decided to sell her five-bedroom house and move into an 1,000-square-foot, two-bedroom apartment. The move allowed her to save $12,600 a year from overall housing expenses. She took the profit she netted from the sale and invested it in a brokerage account where she maintained a diversified portfolio. 

3. She tracked her expenses

Simmons used three tools to track and plan her spending. First, she created a spreadsheet to figure out what expenses she had for the entire year. The chart was a way to pre-plan how she would divide up her income into spending, saving, and investing.

Then, she used the budgeting app Mint to track her real-time transactions on a monthly basis. The tool showed her how she was spending money from one moment to the next, so she could reflect on whether the purchases were worth it.

Finally, she signed up for an account with Personal Capital, which helped her track her net worth.

4. She looked for ways to cut her monthly bills

Simmons reviewed all her monthly bills to find ways to reduce her expenses. She cut out things that she no longer needed and found more affordable options for the products and services she did need.

She got rid of cable TV, which saved her $1,440 a year. She switched her cellphone plan to Mint Mobile, which offered fixed rates and saved her $1,620 a year. And she adjusted her insurance policies to more affordable monthly payments. Simmons even changed the grocery store she shopped at, avoiding higher-priced chain stores.

5. She began maxing out her tax-advantaged retirement accounts

Simmons started to max out her 403(b), a retirement fund provided by her employer. She then learned about an additional option her employer offered, a 457(b). The account is a tax-advantaged deferred compensation plan that allows her to contribute pre-tax dollars. Once both her employer-sponsored accounts were maxed out, she moved the remainder of her available funds to a Roth IRA.

Because of her savings effort, she was able to contribute about 33% of her income towards her retirement fund.

6. She started contributing to a brokerage account

When Simmons was comfortable with her ability to contribute to her retirement funds, she began putting money into her brokerage account through Vanguard. Her investments were a mix of index funds and exchange-traded funds, which kept her portfolio diversified. She did not put in a specific amount every month; instead, her goal was to invest whatever amount was left over from her budget. 

“To become financially independent, I just needed to switch my mindset from spending money, to saving money, to investing money,” Simmons told Insider. “Because the investments have grown so much, way more than I could have even saved over the years.”

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Read More: How a single mother reached financial independence in 6 years

2021-02-25 22:23:47

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