Can parents pursue financial independence with kids at home? Today we’ll go over the five biggest myths and show how you can enjoy parenthood and FI!
Are CoastFI and Parenthood Compatible?
Even before we were familiar with the term financial independence, we were intrigued about this idea of gaining flexibility and freedom.
When we were first married, we had two immediate financial goals – getting rid of the car loan and building our emergency fund.
Our car payment wasn’t a huge burden, but seeing that money going out month after month..ugh..
Not having that weighing our budget down was one benefit, but then there was also this potential in the future.
What if we used that money for things we actually enjoyed and really wanted – travel, a house, or starting a business?
So I started digging into personal finance blogs and found books like Total Money Makeover, Automatic Millionaire, and The Money Book for the Young, Fabulous & Broke.
Taking what I learned, we came up with a plan to pay off our debts and grow our financial cushion.
Don’t get me wrong, seeing our net worth go from negative $30,000 to the positive side felt great. The real pull for us, though, was not how much money we can stash away or how fast we can hit.
We loved being in a position of having options. Like leaving a bad job. Becoming an entrepreneur.
During this time, we discovered financial independence, with that classic book – Your Money or Your Life.
There are some wonderful benefits with discovering the FI community. Many in the space love swapping ideas about what’s worked for them.
Hopefully like you’re doing now, we listened to stories and picked a few ideas to try out.
Some worked really well, some needed to be adjusted for our circumstances, and some didn’t work. Either our situation was too different or honestly, we didn’t enjoy it.
The ones that didn’t resonate with us usually came from this segment in the community who had very specific ideas about financial independence.
Both with what it was and what it wasn’t. One complaint I kept seeing was how hard or in some cases impossible for parents to hit FI.
I believe that belief is not just discouraging to parents, but really misses the actual resource financial independence is about – time.
Finances can be a tool, not the goal. We're more focused on quality of life and having options.
So today I want to wrap up this series of episodes before our summer break and discuss how you as a parent can work towards your FI goals while enjoying the journey with your kids.
In this episode, we’ll get into the five biggest myths around financial independence and parenthood.
Are you ready?
Let’s get started!
Resources for Parents Interested in Financial Independence
If you're looking to get ahead with your finances as a family, here are some resources to check out!
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Jumpstart Your Marriage and Your Money
- High Yield Savings with CiT Bank
- Free 401(k) Analysis: blooom
- Retire Early By Rethinking Your Priorities
- Setting Up Your Retirement with the Right Tools
- The Shockingly Simple Math Behind Early Retirement
- The New Family Financial Road Map
Thank You to Our Sponsor Coastal!
Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.
Slash Your Phone Bill with Republic Wireless!
Special thanks also to our new sponsor this season -Republic Wireless.
If you’re looking to hit your family’s financial goals faster, optimizing your expenses is the way to go. Chances are you’re paying too much for your smartphone and not getting the value you deserve.
Same thing happened to me years ago. Wanting to become debt free faster, I switched to Republic Wireless and saved big time.
Nationwide coverage, fantastic phone options like the Samsung Galaxy and Moto g, plus seriously affordable prices (plans start at $15/month!) make it a smart choice for families looking to save without sacrificing value.
See all they have to offer at Republic Wireless!
5 Biggest Myths About Financial Independence and Parenthood
Although I believe that all families can benefit from including key FI principles into their finances, it’s not a one size fits all approach.
These myths that I see and hear can be discouraging and stop people from even trying to pursue their dreams.
In some cases, it’s debunking, but it also clarifying some concepts.
I’ve seen how this focus on making things short and catchy for social media distorts or confuses people about financial independence and making it their own.
Myth #1: You Have Live Like Paupers to Retire Early
I think this is a huge turn off for many families.
You have to cut things down to the bone to be able to retire early. And that's not the case. The truth is however with financial independence it is a mindset shift. You absolutely have to be more mindful of your finances, schedule, and goals.
That means you're going to make decisions that are different from other people.
You do need to be conscious of your spending.
- Your Essential Expenses: How much money do you typically spend each year? What are your usual monthly expenses?
- Your Savings Rate: How much are you saving and investing each month?
When you're aware of both numbers you can then start on a plan to build up your savings rate and get you to FI faster.
Myth #2: Raising Kids Will Make It Impossible to Pursue FI
USDA estimates that it takes $233,640 to raise one child to an adult.
Not counting college.
Breaking it down annually, that means according to the USDA you’re spending around an additional $13,743.
Years ago, I wrote an article that challenged some of those assumptions. You can read my take here, but here are a few key points.
- Assumptions about food, housing, and
- The biggest chunk of money for most parents I spoke to is daycare.
Parenthood and financial independence aren’t mutually exclusive. It does take mindful prioritization and budgeting.
Myth #3: Only Rich People Can Become FI
First off if anyone tells you that income isn’t a factor, that’s a lie. Having more income can certainly help. However there are plenty of people who:
Make some good money, but still live paycheck to paycheck
Have more modest income, but have done a fantastic job stashing away
While income is a factor, it's not the main one when it comes to financial independence. It goes back to your savings rate and that gap between your income and expenses.
Myth #4: College Savings Will Kill your Retirement Savings
Two things to consider:
You don’t have to pay for your kids’ college.
Thank you for coming to my TED talk.
Seriously though. I’m not that old, but the price of some universities has gotten ridiculous. And for what?
One study found that 43% of college graduates are underemployed in their first job.
The second thing to think about is how college may not look the same or be the path your kid takes.
Certifications can give them the skills and training they need. They may also want to pursue trade school, which can be both fulfilling and financially rewarding.
If you do decide to help your kids with educational expenses, it doesn’t mean you have to sacrifice your retirement or financial well-being.
It does mean guiding your kids towards being more mindful and intention with their education. Which I think serves them better in the long run.
Myth #5: FI is About Never Working Again
There is a big subset of financial independence called FIRE which is financial independence, retire early but financial independence iis a much larger space that group.
There are some who do want work after they hit their FI number. However they want freedom of choice in deciding what kind of work that is. It could be a profitable business, volunteer work, or something seasonal.
I did an episode on the different paths within financial independence, which I’ll link to in the show notes.
For us, CoastFI made the most sense. So the kernel behind it is that you’ve saved enough so you could retire at a traditional age even if you never add another cent again.
That’s money tucked away in tax advantaged accounts like 401(ks) and IRAs. With that milestone out of the way we have a bit of stress taken off our shoulders.
We have more flexibility with work and other choices. It was especially helpful last year as our girls did remote learning. With both of us working from home, we’re grateful we could make it work.
Not going to lie, there were days and weeks when we were trying to find our footing, but it was worth it to us.
So yes, you could retire early – if you want. There are plenty of options you can choose. Make sure that it's based on your family and priorities.
There you have it – the five biggest myths people have about financial independence and parenthood.
Key Takeaways for Parents Pursuing Financial Independence
Before we wrap up, I want to focus on a few key takeaways I got from preparing this episode.
- Define what financial independence means to you.
- Know your numbers.
- Develop your plan in stages and on the season of life you’re in.
Ask questions, swap ideas, and talk about your progress for the year– don’t forget to join us in the Thriving Families group on Facebook.
We’re all about helping one another out with our family and financial goals.
Hope to see you there!
Need an Extra $5K in Your Pocket?
Learn how to find, save, and earn more money in this free email course!