New to FIRE? Here Are The First 2 Levels of Financial Freedom from Grant Sabatier — The Millennial Money Man
Grant believes that money is infinite, but time is not.
Grant believes that money is infinite, but time is not.
Instead of viewing money as a way to buy things, Grant believes money gives you choices about how you can live your life. And as a prominent member of the FIRE (financial independence retire early) community, Grant is on a mission to help millennials achieve financial freedom in their lives. His view is simple: master your money to master your time.
Here are Grant’s First 2 Levels of Financial Freedom:
Clarity: You figure out where you are financially and where you want to go.
Level 1 on the path to financial freedom is clarity.
Clarity involves gaining awareness of your current financial situation and understanding where you want to go from here. One of the best ways to achieve clarity is this simple two-step process:
Calculate your net worth.
Define your ‘why’ of FI (financial independence.)
To calculate your net worth, I recommend using a free net worth tracker like Personal Capital* (this is what I use) or Mint. These programs allow you to link your financial accounts, including bank accounts, investment accounts, credit cards, auto, mortgage, and student loans. This should give you a high-level view of your current financial situation.
From there, define your ‘why’ of FI.
Your ‘why’ of FI is the reason you want financial independence. For me, it’s all about spending as much time with my wife and daughter as I can. For others, it might be traveling the world for months at a time. Whatever the case, take some time to think about it and write out your why.
This will be your guiding light on your FI journey — a beacon of where you want to go.
Self-Sufficiency: You’ve moved out of mom and dad’s and can cover your expenses.
Level 2 is achieving self-sufficiency, even if you’re living paycheck-to-paycheck.
In fact, CNBC writes that most working Americans (roughly 50%) are on Level 2, living paycheck-to-paycheck. And Grant says that many people on Level 2 take out loans or carry credit card balances to make ends meet.
There are two levers you can focus on to move beyond Level 2.
Increase your income.
Decrease your expenses.
First, focus your efforts on increasing your income. This may mean making some investments in yourself, either through professional certifications or additional schooling. While it may cost you time and money in the short run, the payoffs can be immense if you can receive a raise or land a higher-paying job. In addition, many in the FIRE community choose to take on a side hustle or pursue an entrepreneurial venture to increase their income.
Remember, there’s no limit on increasing your income, so focus your efforts there first.
Next, take a look at your expenses to identify any opportunities to cut back. Unlike your income, there’s a limit to how much you can reduce your expenses, so the impact might be limited. But most people will be able to identify at least a few ways to save money each month.
Start with the big 3: housing, transportation, and food.
The big 3 make up almost 2/3rds of the average American’s budget, so they’re a great place to start. Many people in the FIRE community have identified various ways to reduce their housing expenses through house hacks — either renting out a portion of their home, living with roommates, or moving to an LCOL area. Others have cut back on transportation, trading in the new car for a 5 to 10-year-old used Honda or Toyota or deciding to forego car ownership altogether. And lastly, many have chosen to meal prep and buy in bulk to cut their food costs dramatically.
These are all just options — you choose what works for you.
Once you’ve identified any big opportunities to reduce your expenses, you can begin to trim at the edges if you like. Here are three few easy ways to save money each month:
Switch to a budget cell phone provider like Mint Mobile*
Shop around for lower insurance rates through PolicyGenius*
Take stock of your monthly subscriptions and cut back on any you aren’t using.
When cutting expenses, it’s essential to avoid cutting back on the things that bring you joy.
So if you love dining out, keep plenty of money in the restaurant category of your budget. But don’t be afraid to cut back mercilessly on the things that don’t matter to you. By aligning your spending with your values, you will get more satisfaction from each dollar spent.
Remember, every journey begins with a single step — so get started on your financial independence journey today.
*If you sign up using my referral links, I may receive a small commission.