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I’m On Track To Achieve FIRE By 45 After Paying Off $50,000 In College Debt In 2 Years On A $62K Salary. Here’s How I Did It

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I’m On Track To Achieve FIRE By 45 After Paying Off $50,000 In College Debt In 2 Years On A $62K Salary. Here’s How I Did It

Getty Images; Chris Chung

At 26, Chris Chung had college debt and no investments. Now 33, he’s debt-free and on track to achieve FIRE for himself and his family at age 45.

We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

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Chris Chung’s Financial Independence, Retire Early (FIRE) journey started with an ultimatum.

“My dad was like, ‘Hey, so, you know… we took out some loans for you for college’,” says Chung, who now runs the account @the.everyday.millennial on Instagram. “‘Now that you’re back on your feet … we need to have you start paying some of that that money back.’”

The ultimatum completely caught the then-26-year-old off guard, who had been planning to propose to his girlfriend and start a family. He pledged to find a way to pay off all his debt as quickly as possible.

“I focused. I paid off all of my student debt within two years – the full $50,000,” he says. “The reason I mention that so often is because I wasn’t making $200,000 when I was paying this off. I was making no more than $62,000, while living in a high cost of living area: Washington, D.C.”

Here’s how he paid down his college debt quickly – and what he’s been doing since then to put himself on track to achieve FIRE and retire at the age of 45.

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How He Paid Off $50,000 of Debt in 24 Months

Chung was fortunate in that his parents took out loans to help him pay for college. Upon graduating into a recession, however, he had trouble finding lucrative work, which meant he couldn’t get back on his feet right away. The timeline to pay his parents back was never fully established or discussed.

Chris Chung and his daughter, Emelia

“It was going to be some sort of determined amount that, after I graduated, and I had a job, I was going to have to pay back,” he says. “But naturally, as a kid who wasn’t making any money, I was like, ‘Well, it’s been five years since I graduated… maybe like they’re not going to ask me [to pay it back] at all.’ I wasn’t living a lavish lifestyle at all; I was just trying to make ends meet. But I think for them, they were like, ‘Alright, we’ve given you enough years, it’s time to have this conversation.’” 

Chung says he had about $10,000 saved up at the time, which made the sudden $50,000 bomb drop from his parents overwhelming. He’s not alone; one in four Americans report never talking about money with their parents, according to a survey conducted by GoBankingRates.

Despite recently relocating to Washington, D.C. on a salary of $62,000/year, Chung was determined to pay down the debt to his parents as quickly as possible. He slept on a friend’s couch for his first three months in the city, and when he and his then-girlfriend Eileen moved in together, they shared a 2-bedroom apartment with a roommate, which saved the couple $750/month.

Some of Chung’s other winning strategies were to

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  • Learn how to cook well so that the food you make actually tastes good.
  • Actually use your groceries – food waste is a hidden cost.
  • Utilize amenities that you already have, such as the gym in your apartment complex.

“A lot of people with similar [salary and living cost] circumstances as mine, they think it isn’t possible,” he notes. “I can definitely tell you that it’s possible, but a lot of it comes down to this: How much do you want it? And how much are you willing to work for it? Once I paid off my student loans, it gave me so much confidence. I know that I can do something if I put my mind and my effort into it.”

Pro Tip

The discipline it takes to pay down debt now will serve you well later in future personal finance aspirations.

After Your Debt Gets Under Control, Prioritize Investing Basics

Once he was debt free – and with baby Emelia on the way – Chung became curious about FIRE, the financial movement in which people aspire to accelerate their retirement timeline by making and saving more money each month. He first redirected his personal finance literacy efforts toward learning about investing and compound interest strategies. 

Chung started by focusing on maxing out his employer-sponsored 401k, which allows you to contribute up to $20,500 to each year. He then opened a Roth IRA and began contributing $6,000, the maximum annual limit, each year. Since your Roth IRA contributions are made after paying taxes, gains made from investments within a Roth IRA are tax free. You can fund and invest in both a 401k and a Roth IRA at the same time.

Once both of those compound interest drivers were maxed out, Chung opened a separate brokerage account and began using it to invest in additional low-cost index funds. Eventually, he calculated his FIRE number, and determined that he could retire both himself and his family by the age of 45.

Top FIRE Tips for Retiring Early

When it comes to pursuing FIRE while also raising children, here are some of Chung’s recommendations.

Maximize Your Health Savings Account (HSA)

“One of the biggest questions I get about FIRE is ‘What am I going to do for medical insurance?’” he says. If your budget still has a monthly surplus, Chung recommends maximizing your Health Savings Account (HSA) every year to safeguard against unexpected medical expenses in case you encounter a lapse in coverage. Americans can invest up to $3,650 each year ($7,300/year for families) into a health savings account, and this money can be invested tax-free.

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“Anything can happen,” says Chung. “I plan to max it out every year and invest it for the next 12 years. With the compounding interest, I’m hoping to have between $120,000 and $150,000 in that account by the time we retire.”

Understand Your Options When It Comes to Saving for Your Children

529 plans are popular for college savings, but they aren’t for everyone. Chung has one for his family, but says this decision is personal.

“We’re supporting Amelia with a 529, but there are other options such as a brokerage account or a custodial Roth IRA,” he notes. “Our strategy is we want to help her on her financial journey.”

But Remember to Put Your Oxygen Mask On First

Chung often reminds his followers that one of the best ways to support our children financially is to get our own personal finances in order first.

“I see it all the time where parents aren’t even investing for themselves,” he says. “And they’re like, ‘Well, how do I help out my kids?’ You have to focus on yourself and your own oxygen mask first. If we’re in a really good spot, [your kids are] going to automatically get generational wealth.”

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Focus on Mastering One Strategy at a Time

Chung notes that FIRE enthusiasts have many options for both making more money and building wealth through active investments. He says zeroing in on one strategy first – such as real estate investing, layering in a side hustle, or budgeting more carefully – will yield more stability and momentum in the long run, rather than trying to become a jack of all trades and master of none.

“Focus on one thing that you can do well, then really implement that strategy,” he says. “People try to do a little bit of everything, and I think you’re only able to see these types of [financial] results when you start with implementing one [FIRE] strategy really, really well.”

Until then, the Chung family is building wealth that will someday all belong to baby Emelia.

“Everything that we own is going to be hers one day.”

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I Hit My FIRE Number At 37, But I’m Not Retiring Yet. Here’s What I’m Doing Instead

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I Hit My FIRE Number At 37, But I’m Not Retiring Yet. Here’s What I’m Doing Instead

Featured Contributor

Bernadette Joy is the founder of Crush Your Money Goals. Her education and coaching program teaches millennial women how to become debt free after she and her husband paid off $300,000 of debt in three years. You can find her at crushyourmoneygoals.com and @bernadebtjoy on all social media.

Getty Images; Hunter Newton/Next Advisor

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“Even if you feel like a complete money mess today, financial independence can still be possible for you,” says Bernadette Joy (pictured above).

We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

We did it!

After five years of painstakingly managing our budget, growing our income, and paying down $300,000 of debt, my husband and I reached a goal I thought would take us at least another decade.

We hit our FIRE number.

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This means we have enough money in investments to become work-optional, according to the calculation traditionally used by the FIRE (Financial Independence, Relax Early) movement. For us, our FIRE number equates to $900,000, which will generate enough income to cover basic living expenses of about $3,000 per month. 

But hitting that number did not end our financial freedom journey. Instead, it kickstarted us into the next phase: mastering our tax and drawdown strategies, detaching from our career-based identities, and learning how to truly relax for the first time in our adult lives. 

If you’re working toward financial independence, you should know that you will get there if you stay committed to your goals and investing strategy—even if you mess up a few times along the way, like I did. You should also know what happens next. Here are four things my husband and I are doing now that we’ve hit our FIRE number. 

Pro Tip

This is the last column of a 5-part series from Bernadette Joy. In “Mess to Million,” she shows that you don’t have to be perfect to get rich. Follow @nextadvisor on Instagram for updates and live Q&As with Bernadette.

1. We’re detaching from the ideas of forever homes and forever careers

As first-generation Asian Americans, both our parents ingrained in us that success would be a high-paying, stable career and one big house we raise our family in.

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Now, without the pressure of having to go to work for more money, we’re both excited to try new kinds of work that we have intrinsic interest in. AJ has been exploring old hobbies like collecting and trading comic books, which has been more about meeting the small business owners who run these shops and treasure hunting than the money itself. I’ve taken my interest in creating personal finance content on social media and courses to writing articles like this column and speaking at live events. A few years ago I never would have dreamed of calling myself a writer or speaker! 

Knowing that we have the cushion of a basic retirement has given us more confidence and more time to explore what different careers can be for each of us— without the need to stick to it if we find it doesn’t suit us. 

We’ve also started reinterpreting our version of the American dream: moving to a new city every few years, or having multiple smaller homes around the world, rather than just one big home that we buy and pay off for 30 years like our families did. After reaching our FIRE number and paying down our 4-bedroom home in Charlotte, NC, we bought a smaller condo in the mountains of Asheville, NC, and learned that we didn’t really miss the maintenance a larger home requires. We ended up selling the larger home and are finding that less lawn and household items to maintain better fits our definition of retirement. 

2. We are reshaping our preconceived ideas about retirement 

When I teach the principles of FIRE at Crush Your Money Goals, I always ask my students what they would do if they were to retire early. The most common answers I get are 1) travel 2) spend more time with family and 3) pick up new hobbies. My husband AJ and I would have said the same answers, and now we actually have the opportunity to test those ideas out in our thirties and forties rather than waiting for our fifties and sixties.

After we reached our FIRE number, we decided to give ourselves permission to slow down our investing and re-route some of those funds to vacations, eating out more, board games, and tickets to live concerts. With both our jobs becoming fully remote, we also took the opportunity to work from anywhere and become digital nomads, something I had long fantasized about, even before the pandemic. 

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It’s all been great, except for a twist we didn’t expect at all: we found it all incredibly exhausting!

It turns out that waking up in a new city every few days isn’t as thrilling as I thought it would be, and I learned that I actually enjoy sleeping in my own bed and cooking my own food more often than not. The 100+ board games AJ so enthusiastically bought during the pandemic have largely gone unplayed. And while I will still go to any K-pop or country music concert scheduled in the immediate future, I don’t look forward to big crowds and long lines, even when BTS is on the other side.

Now, rather than centering ourselves around productivity and achievement, we’re starting to learn how to prioritize rest and relaxation for the first time in our adult lives. One simple way I’ve done this is by keeping an “off screen” journal, encouraging myself to schedule downtime that doesn’t include being on a television, computer, or phone. It’s been eye-opening to find how hard it is for me to  take a simple stroll, read for pleasure, or just sit by the fire, because these things aren’t “productive.” It continues to be a work in progress.

3. We’re learning how to be even smarter with our investments

Just as soon as we hit our FIRE number, the investments we had—mostly in index funds and ETFs—started to decline in value due to the volatility in the stock market. This felt disheartening after benefiting from steady increases over the last few years, and at times I wondered if we should have put all that money into our investments as quickly as we did.

But then I had to remind myself that these dollars were put in there for the long haul, and I need to let them do their work for the next few decades, while continuing to dollar cost average at a less aggressive rate than we did before. 

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Now, we are looking at ways we can continue to diversify the additional investing we will participate in, including learning about and investing in things like Real Estate Investment Trusts (REITs), traditional real estate, NFTs, and other small businesses.

We’re also learning ways to save on additional taxes for our current investments. Last year, I opened up my own 401(k) through my business for the first time, after not having had access to a 401(k) since leaving my last corporate job—saving me the taxes I would have paid by putting the same money into a brokerage account. And in another tax-saving strategy, we’re working with a tax professional to help us convert our traditional 401(k)s into Roth IRAs over the next few years.

4. Most importantly, we’re putting our health and mental well-being first

If I’m being completely transparent, our financial freedom journey didn’t start with a flash of genius or the idea of a bright future. It started because my mental health was on the verge of collapse. At the time, I  was working a full-time job and a side hustle while attending graduate school, and I had no idea where I would find the time, money, or energy to pay off the $300,000 of debt we had accumulated beyond our means.

Hitting our FIRE number not only gave us financial room to breathe, but gave me actual room to breathe.o My FIRE number has given me time to focus on the basics of healthy living—sleeping normal hours, exercising more regularly, eating intentionally, and spending more on medications and supplements that I long ignored. When either of us have gotten ill, we no longer rush back to work right away but focus on getting healthy first. And while many of our friends and family still hold a stigma against admitting to struggles around mental health, we both carve out the time and money to see a therapist regularly and take breaks during the week, not just on the weekends, for self-care.

Your journey to financial independence doesn’t have to look like mine

And with this article is the end of the Mess to Million series! I recognize that everyone’s story is unique and challenging in their own ways, and by no means do I expect that all of my experience would reflect yours. But I do hope that in sharing the lessons, and yes, the many messy actions I took along the way, you find some inspiration and practical steps you can take to continue your money journey—with a little less fear and a little more joy! 

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And as always, I’m here to remind you that even if you feel like a complete money mess today, financial independence can still be possible for you.

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I’m A CFP And A Mom. Here’s Why I’m Not Investing In A 529 Plan For My Kid

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I’m A CFP And A Mom. Here’s Why I’m Not Investing In A 529 Plan For My Kid

Courtesy of Naomieh Jovin

Pamela Capalad and her husband say they will not invest money in a 529 plan for their son. By not locking their money in a 529, they have more flexibility in case their son decides not to go to college when he’s older.

We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

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I was helping a client decide whether or not she should contribute to a 529 plan for her new baby. 

“So if I put $10,000 into the plan in New York state, I get a state tax deduction? What’s the math on that?”

Pamela CapaladCourtesy of Naomieh Jovin

I’m a certified financial planner at my company, Brunch & Budget, and we help people of color build generational wealth. I quickly looked up state tax rates for her income bracket — she’d pay about 6% state tax.

“You’d save about $600,” I shared.

She scrunched up her face. “That’s it?”

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“Yeah, not a huge amount,” I agreed. “Also, if you don’t end up using the account for educational purposes, you actually get hit with a 10% penalty and will owe taxes on the gains.”

Needless to say, she didn’t open a 529 plan.

529 plans were designed for the wealthy and marketed to the rest of us. 529 plans are investment accounts that have special tax breaks if you use the funds for qualified education costs—and penalties if you don’t use the funds for education.

I learned about 529 plans early in my career when I worked in wealth management. We helped our high net worth clients open them and fund them. We told them all the benefits:

  • There’s a state tax deduction in 34 states (as long as you open the plan in the state you live in)
  • You put the dollars in after tax, but all the investment growth on the account is tax-free (much like a Roth IRA)
  • All the distributions are tax-free, as long as you use it for educational purposes (now up to $10,000 per year can be used for K-12 private education)
  • You can change the beneficiary anytime to anyone
  • You “only” pay a 10% penalty, plus capital gains tax, if the distributions are not used for education

But this was the kicker: you can gift large amounts of money at once without eating into your lifetime gift/estate tax exclusion.

If you just read that sentence and you’re thinking, ‘Wtf are those words?’ let’s break it down:

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Let’s say you have an estate worth about $12.5 million (so, about 0.2% of you). If your estate is worth more than $12.06 million (in 2022), you will owe up to 40% in estate taxes when you die for every dollar over $12.06 million, so in this example you’d owe estate tax on $440,000.

Of course, you’re thinking, ‘Well I don’t want to pay estate taxes on $440,000 of my $12.5 million estate! That would put me out almost $150,000 in estate tax (or 1.1% of my total estate)!’

Here’s where the 529 plan comes in. Every person is allowed to gift up to $15,000 per person, per year ($30,000 per couple) in what’s called an “annual gift tax exclusion.” This allows a wealthy person to get money out of their estate now and avoid paying estate taxes later down the line.

A 529 plan has a rule that you’re allowed to frontload your annual gift tax exclusion up to five years, which means that a couple can put up to $150,000 at once into a 529 plan. Let’s say you have 3 kids and you open three 529 plans. You moved $450,000 out of your estate and saved $150,000 in federal estate tax (the Obamas did this for their two girls in 2007).

My client above, who was not quite worth $12.5 million, and who would in fact struggle with putting $10,000 into a 529 plan, was looking at a maximum $600 income tax break. She wasn’t sure if her child would need the money for college, or to buy a house or start a business. She couldn’t afford to take the risk of a 10% penalty, plus taxes if the money didn’t go towards education. And depending on her family’s income, the tax savings of a 529 plan might actually be $0. Here’s why.

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How the Rich Benefit From 529 Plans

One of the biggest benefits of a 529 plan is you don’t have to pay capital gains tax on any distributions used for education. The capital gains tax rate is based on income, and if your household makes less than $83,350, your capital gains tax rate is 0%. The median household income in 2022 is $61,937, so most American families would be paying a 0% capital gains tax rate anyway. 529 plan contributions also count against financial aid calculations. 

It’s no wonder that “only 0.3% of households in the bottom half of the income distribution have 529 accounts, while 16 percent of the top 5 percent do,” according to the Conversation, citing Federal Reserve data.

The main benefits of 529 plans are additional tax shelters for high net worth families, and it’s costing taxpayers billions of dollars. In a 2017 piece, Richard Reeves at Brookings College states that “As 529s grow, so do the cost of associated tax advantages, which will cost the federal government almost $30 billion over the next decade.” This estimate only takes into account capital gains tax breaks and not the estate tax shelter for the wealthy, which could add up to billions more in lost tax revenue. 

The cost of college has grown faster than inflation over the last several decades, on average about 8% per year according to Finaid.org, meaning the cost will double every 9 years. 

By the time my client’s child is 18 years old, one year of undergrad could cost $100,000. I’m a mom of a 2.5-year-old and I love him to pieces, but we can’t afford to send him to college if it costs that much! Since the benefits of a 529 plan are restricted to education expenses, we chose not to set one up for our son.

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Reeves also posits in his piece that the rising tuition costs and the growing use of 529 plans could be related: “The cost of college has increased fastest at the types of institutions preferred by, and attended by, students from the households most likely to benefit from the 529 public subsidy. These institutions also typically have relatively low numbers of students on Pell grants.”

The average American family does not benefit from opening a 529 plan and in fact, may face hefty penalties if the funds don’t end up getting used for education. We need a better solution to help lower and middle income families cover the rising cost of college. 

Other Options Instead

If you want to save for your child, a simple savings account or a basic investment brokerage account will do the trick. We have our son’s savings in a regular savings account for now and will soon move it to an investment account. We want our family to have the flexibility to help fund whatever future plans our son creates for himself.

If you want to get really fancy, consider setting up a UTMA (Unified Trust for Minors Account). It’s an investment account for your child where you are the account holder while your child is a minor. The ownership transfers to your child at the age of 21 and they can use this money for anything. Give you and your child complete control over where the money is spent, whether or not they decide to use it for higher education.

Pro Tip

If you want to invest for your child, consider a savings account or a UTMA, which is a Unified Trust for Minors Account. It’s an investment account that gives your child the complete flexibility to spend the money on anything, rather than higher education.

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My client needed to prioritize maxing out her 401(k) at work, paying down credit card debt, and building up an emergency savings fund. She wanted to start setting aside money for her new baby, but I ended up telling her that the best gift she could give her child was to not have to take care of her mom in retirement. 

She’s currently setting aside $100 a month into a savings account earmarked for her child and when that grows to a certain amount, I’ll help her move it to an investment account. By prioritizing her own financial journey, she will end up prioritizing her child’s in the long run.

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