A 30-year-old who built a 7-figure net worth shares the often-overlooked first step to achieving financial freedom
Courtesy of Michela Allocca
- Michela Allocca built a seven-figure net worth by 30, thanks to increasing her income, diligent saving, and prudent investing.
- After years in the corporate world, she's now a full-time content creator in the personal finance space.
- She says the first step to hitting financial freedom is simply knowing where your money is.
A 30-year-old who built a seven-figure net worth says the first step toward financial freedom isn't budgeting, investing, or cutting expenses. It's simply knowing where your money is.
Before focusing on growing wealth, Michela Allocca, founder of the personal finance brand Break Your Budget and author of "Own Your Money," says people need a clear picture of what they already have.
How much money is in your retirement account? Do you have multiple retirement accounts? Do you have a brokerage account? If so, how much money is in there, and are you actively contributing to it? What about cash — do you have enough in cash, or do you have too much because you're afraid to invest?
If you can't answer these questions, set aside a weekend morning or weekday evening to sit down and do an "account audit," said Allocca, who spent years in the corporate world before transitioning to full-time content creator. Since quitting, she's quadrupled her income.
Once you know where you're starting from, you can figure out how much you actually need to reach your goal, whether it's early retirement or becoming work optional.
"Looking at where your money is really is that first step," Allocca said. From there, she recommends using a financial independence calculator to map out realistic targets.
Say you're trying to hit Coast FIRE, an offshoot of the Financial Independence, Retire Early movement, where you no longer need to contribute to your retirement accounts. Instead, the amount you've already invested is expected to grow and compound enough over time to support your retirement, allowing you to "coast" into your golden years.
"You can just go onto Google and very simply search up a financial independence calculator, plug in your numbers, and it will tell you, OK, you need to have, let's say, $250,000 invested in your retirement account by this age in order to reach Coast FIRE," she said.
Maybe you're closer to that $250,000 number than you thought, or maybe you've already surpassed it. Whatever the case, now you have a specific goal and know exactly how far away or close you are to reaching it, thanks to your financial audit.
Courtesy of Michela Allocca
Knowing whether you've hit, or are close to hitting, a milestone like Coast FIRE can be life-changing.
"You go to work to pay your bills in the present and to save for retirement in the future," Allocca said. "So if you eliminate the need to keep saving for retirement, that opens up an entirely new financial reality for you."
Suddenly, you have options. You can continue working your day job and redirect the money you would otherwise save for retirement toward other financial goals. Or, maybe you hate your job, and now, without the pressure to save tens of thousands of dollars a year for retirement, you could pivot to a lower-paying job you actually enjoy or take a sabbatical.
The problem is that many people never run the numbers.
"They're not seeing how close they are, or how close they could be with two or three years of diligence," she said, adding that she's no exception. "If I had calculated my numbers years ago, I probably could have either hit these numbers sooner or had a different relationship with my finances. I wouldn't have been reaching for more and more, thinking I'd never have enough, because I would have known."