Delyanne Barros is a debt-free immigrant entrepreneur who’s on track to retire in a few years when she hits 45. She emigrated from Brazil to the U.S. and has since moved to Portugal. She’s never owned a profitable piece of real estate and didn’t begin investing until she was 28. She also had to pay off six figures in law school debt to get to this point.
Now a personal finance coach, this is her advice for others looking for financial freedom before their mid-60s.
Budgeting will only get you so far
Most financial advice tends to focus on cost-cutting to save for the future, but there are only so many costs you can cut, especially in a world where everything is getting more expensive. And some cuts — like skipping the fancy coffees or occasional overpriced avocado toast — may not make as big a difference as you think.
“You’re supposed to be enjoying your life all of the time not just counting down to the day you’re supposed to be building your dream life,” Barros says. If you’re barely making ends meet, giving up the affordable thing that makes you happy, like your weekly trip to the movies or your favorite fancy coffee twice a week, may not be a realistic expectation to set for yourself.
At some point, increasing your income is the only way to pay for your current life and finance your future. That could mean a side hustle, entrepreneurial venture, or a new job. “If your current job isn't allowing you to finance this dream, the number one priority is income,” Barros says. “You cannot budget your way out of these things.”
For Barros, the game changers were beginning to invest in the stock market and starting her own business. To become financially and geographically independent, she spent a decade aggressively paying off her six-figure student loan debt and building Delyanne, The Money Coach, an investing course and coaching business. “The business is what allowed me to move to Portugal,” she says.
Learn the language of investing
Investing in the stock market is one way to attain financial freedom, and you may already be doing it if you have a 401(k) or Individual Retirement Account, or IRA.
It’s intentionally intimidating, but it doesn’t have to be, according to Barros. “There’s like a million acronyms,” she says. “The financial industry created the whole other language to force you to hire a professional.”
Some professionals are subject-matter experts who can provide key advice and perspective at a fair price along your investing journey. Some aren’t as helpful. “It’s easy to get taken advantage of and to overpay for things,” Barros says.
With an understanding of the language, you can do more for yourself and have a more informed perspective on any professional advice you’re given. As you’re getting started, Barros recommends studying the vocabulary of investing. Read about the differences between Individual Retirement Accounts, ROTH IRAs, 401(k)s and brokerage accounts. A better understanding of key terms will make you a more comfortable investor, she says.
Play the long game
Day trading is probably not going to get you the financial freedom you seek, and certainly not overnight. When it comes to investing, setting it and forgetting it and time are two of the best ways to go, according to Barros. “You don’t want to have to make these decisions every month,” she says.
If you choose to invest in the stock market through a brokerage or retirement account, she recommends not checking your performance on a daily or even weekly basis. Instead, she advises people to check their accounts quarterly. As you get pay increases, increase your retirement or brokerage account contributions instead of upgrading to a new house in a nicer neighborhood, going on a lavish bucket-list vacation, or getting a new car. “Then you just go live your life,” Barros says.
She cautions new investors against watching financial news channels all day as they’re getting started. Stocks may indeed go down, but “that volatility is the cost of investing.”
“The only way that investing works is to leave money in it for a long time,” Barros says. Instead of adopting a three- or five-year plan, Barros recommends investors think of their investments on a seven to 10-year timeline.
And the more you invest, the more you can expect your investment accounts to grow. “After $100,000, that’s when you start seeing the compounding effect in your account,” Barros says. “I tell people to run towards that goal — $100,000.”
Investing should also never be treated as a solution for a short-term income problem, any situation in which your income doesn’t meet or exceed your monthly living expenses. “That’s how you gamble and lose your money,” Barros says.
Know where to start
Before you start investing, make sure you have an emergency fund of cash equal to three to six months' worth of expenses in a high-yield savings account. “This does not get touched,” Barros says.
Investing that money in stocks through a brokerage account or retirement account could mean losing it or having to sell investments at a loss when expensive and unexpected life changes happen. An early withdrawal from a retirement account to cover an emergency expense could also hit you with tax penalties.
When you are ready to invest through a brokerage or retirement account, start with exchange-traded funds and index funds. Exchange-traded funds, commonly known as ETFs, are groups of stocks, bonds, or other securities that are designed to function like a single stock. Index funds are versions of ETFs designed to match the performance of a stock index like the S&P 500.
This approach can be less risky than investing in single stocks and less stressful to manage.
If you’re wondering how much money you need to start investing in the stock market, Barros says even $200 a month can be a good place to start. Many people may already be investors without realizing it, she notes. She’s often asked if a 401(k) counts as investing. “Absolutely your 401(k)s invested in the stock market,” she says.
It’s not too late
There are many paths to retirement and many different ideas of what retirement can be. Getting a late start doesn’t necessarily mean you can’t catch up.
Even someone in the early 40s could reasonably find themselves living the retired life abroad in their mid-60s, Barros says. “Twenty or 25 years is a lot of time to invest, build wealth, change your spending habits, and change your mindset.”