If you are over 50 and don’t feel financially free yet, you may look at people talking about retiring in their forties and think, “Well, that’s not going to happen for me.” Creating financial freedom after 50 may seem like an impossible goal.
But I don’t think it matters. You don’t need to retire at 40 to be financially free. You need to create enough financial breathing room that you have choices about how you spend the rest of your life. And your fifties can actually be a fantastic time to do that.
By 50, you know yourself. You know what you enjoy, what you don’t care about, and, hopefully, what you are no longer prepared to put up with. Maybe your children have left home. You may have accumulated assets. You may have valuable skills and experience that you can turn into income. And you may finally be willing to make some of the big changes that seemed impossible when you had a completely different set of responsibilities.
I’ve been thinking about this very personally. I recently sold my large family home and am downsizing to a much smaller place. The goal is to be mortgage-free. I don’t need all that space anymore, and I realized that the house wasn’t just costing me money. It was costing me time and energy too. There was more to clean, more to maintain, more to heat, and more stuff to look after.
The smaller home gives me something I value enormously: optionality. Being mortgage-free means having a much lower monthly cost of living. And that changes the equation. If I need less money to live, I don’t need to earn as much. If I don’t need to earn as much, I have more freedom about what I do with my time. That, to me, is financial freedom.
When people talk about saving more money, the conversation often turns to giving up little luxuries. Make your own coffee. Cancel Netflix. Stop eating out. Fine. Those things can help, but if you are looking to achieve financial freedom after 50, I would look somewhere else first. Look at the big expenses.
Housing is usually the biggest one. If your children have left home, ask yourself whether you still need the house you bought when you had a full family living in it. You might discover that selling a large house and buying something smaller could do more for your financial freedom than years of cutting back on little purchases. You could potentially reduce your mortgage, property taxes, insurance, utilities, and maintenance costs all at once. And there is another benefit that doesn’t show up on a spreadsheet: less house means less work.
The same applies to your car. Cars are one of those expenses we tend to underestimate because we focus on the monthly payment. But add up the payment, insurance, fuel, servicing, repairs, tires, and registration, and you may discover that your car is costing you hundreds, or even thousands, every month.
What if you sold the expensive car and bought a good used one outright? What if you went from two cars to one? Or what if you moved so you could walk or bike to work? Don’t let the $500 or $700 you were spending on the car simply disappear into your general spending. Set up an automatic transfer and send that money straight into an investment account every month. You have just turned a lifestyle expense into an investment.
One of the most useful numbers to know if you want financial freedom after 50 is your savings rate. It is simply the percentage of your income that you save and invest rather than spend.
Saving 10 percent is very different from saving 30 percent. And saving 50 percent is a completely different financial strategy again. That may sound impossible if you are currently saving 10 percent. But don’t assume you have to find the extra 40 percent by becoming incredibly frugal.
You can find it by changing the structure of your life. Downsize your home. Eliminate a car payment. Live on one income and save the other. Take in a lodger or roommate and use the rent to reduce your housing costs or increase your investments. Start earning money on the side. Put bonuses and pay rises straight into investments instead of increasing your lifestyle.
The goal isn’t to make yourself miserable. The goal is to make a few big decisions that permanently change the amount of money flowing towards your future. For example, imagine you free up $1,000 a month by downsizing, another $600 by getting rid of a car payment, and $400 by cutting other fixed costs. That’s $2,000 a month without earning another penny.
Now imagine you start a small side business that brings in another $1,500 a month. You have created $3,500 a month of additional financial capacity. That’s $42,000 a year. Suddenly the idea of dramatically increasing your savings rate doesn’t look quite so crazy.
Once you have cut the big expenses, turn your attention to income. At this stage of life, you may have something that is more valuable than money: experience. Think about what you know how to do that someone else would pay you to do. Could you consult? Coach? Teach? Write? Freelance? Sell something you’ve created? Turn a hobby into a small source of income?
It doesn’t have to become a second career. An extra $1,000 a month is $12,000 a year. An extra $2,000 a month is $24,000. If you invest that money rather than spending it, you have created a completely new stream of wealth. And if you are part of a couple, there is another powerful possibility: live on one income and save the other. You don’t necessarily need to change anything about your day-to-day life. You simply decide that one income funds the lifestyle and the second income funds your financial freedom.
For someone who is single, the equivalent might be deciding that every dollar from a side business, freelance work, bonus, or other extra income goes directly into investments. The important thing is to separate the money before you get used to spending it.
There is another area that becomes increasingly important as your investments grow: fees. A small annual investment fee of 1 or 2% may not look like much when you are starting out. But over many years, fees compound too, and they compound against you! If you are paying for investment products or services you don’t need, that money is coming out of the money that could otherwise be growing for you.
This is why I believe that learning about money is one of the best investments you can make. You don’t need to become a stock market expert. But you should understand the basics. You should know what you are invested in, what you are paying, how much you are saving, and what you actually need your money to accomplish. The more you understand, the more confident you can become about making sensible decisions with your own money.
I created my Financial Independence, Retire Early (FIRE) Course to help you get on the path to financial freedom. You don’t need a huge six-figure income or an extremely frugal lifestyle. You need to understand your numbers, increase your savings rate, learn the basics of investing, and make deliberate choices about how you want to live.
This is the question I would ask yourself if you are over 50. Not, “Why didn’t I start when I was 25?” That question isn’t useful. Instead, ask, “What could I change now?”
Could you:
- be mortgage-free?
- move somewhere smaller?
- get rid of a car payment?
- live on one income?
- rent out a spare bedroom?
- create a side business that earns an extra $1,000 a month?
- put every pay rise into investments?
- reduce your investment fees?
- learn enough about investing to stop feeling intimidated by your own finances?
You might be surprised at what is possible when you stop looking for tiny savings and start making big moves.
Financial freedom after 50 isn’t necessarily about retiring completely. It might mean working three days a week instead of five, or having enough invested that you can leave a job you hate without knowing exactly what comes next. It might mean taking six months off to travel, or starting a business because you want to, rather than because you need the money.
For me, downsizing isn’t about having less. It is about needing less. And there is a tremendous difference. When you need less money to maintain your life, you have more freedom to decide what you want your life to be.
That is the real promise of financial freedom after 50. You don’t need to recreate the life you might have built if you’d started investing at 25. You can take the life you have today and make some big, bold changes that give you more freedom from here on out.
You may have fewer years ahead of you than you had at 25. But you also have something you didn’t have then: experience, perspective, assets, skills, and a much clearer idea of what you want your freedom for.
Resources:
- Financial Independence, Retire Early (FIRE) Course
- Todd Tressider’s Ultimate Retirement Calculator at financialmentor.com. This free tool provides valuable insights into how much you should save and how investments can grow over time.
- Vanguard, known for its low fees and professionalism, offers a very simple Retirement Nest Egg Calculator. This tool helps you estimate how long your retirement savings will last based on your expected annual expenses, investment allocation, and other financial variables. It is very simple and basic, but it can help you see if you are on track to ensure your savings align with your retirement goals.
