- Grant Sabatier of Millennial Money built a $1.25 million net worth in five years and retired early at age 30.
- In his new book, "Financial Freedom: A Proven Path to All the Money You Will Ever Need," he shares advice on building wealth, retiring early, and living life on your own terms.
- In the excerpt below, he says building wealth relies on three basic variables: income, savings, and expenses.
- While most financial advice focuses on saving more and cutting back expenses, it often misses the power of increasing your income, which can fast-track you to financial independence.
- Earning more income enables you to save and invest more money and take advantage of compounding opportunities.
The following is an excerpt from "Financial Freedom" by Grant Sabatier:
While there are many ways to build wealth, they all rely on the same three basic variables (I like to call them levers):
- Income: How much money you are making
- Savings: How much money you are saving/investing
- Expenses: How much money you are spending
This is not rocket science. The more you increase your savings and income and the more you decrease your expenses, the more money you'll have and the sooner you'll be able to reach the next level of financial freedom and financial independence.
The problem with most personal financial advice is that it focuses primarily on two of these three variables: how to reduce expenses to increase your savings. But you can only cut back so much before you feel like you have to live in a cardboard box if you ever want to be financially secure.
And no matter how much you cut back or how often you crash on a friend's couch or grab free food from catered company events, the amount of money you can save is limited by how much money you are making.
But there is something deeper here that most books and experts miss. In order to build wealth quickly, you need to maximize the potential of all three levers. By reducing expenses while simultaneously growing your income, you'll have more money to save/invest, which will help you increase your savings rate.
While both are essential, to fast-track financial freedom, increasing your income is more powerful than cutting back on your expenses because you can only cut back so much and it gives you the opportunity to invest more money more often, accelerating the rate of compounding and the growth of your money.
When I was trying to figure out how to save a million dollars by the time I turned thirty, I did the math and realized that even if I saved 50 percent of an annual salary of $50,000 and it compounded annually at 7 percent, it would take me at least twenty-five years to save $1,250,000. And by then, because of inflation, even that might not be enough to retire.
Unless you're earning quite a bit of money already, it will be difficult to reach financial independence quickly by savings alone. Not that you can't do it — you definitely can — it just might take you twenty-plus years, which is still better than forty years or never!
The more money you can make, the more money you can save
That being said, saving is extremely important, and the more money you can make, the more money you can save. And if you can become a super saver (the term I use for those who save more than 25 percent of their income each year), you can significantly cut the years you need until you can "retire."
Anita, a lawyer who lived in Chicago, reached financial independence in five years at the age of thirty-three with $700,000 in her portfolio. She did this by saving 85 percent of her income and living on less than $25,000 per year. By saving 70 percent of the incomes Steve and his wife, Courtney, earned from their jobs, they were able to save $890,000 and both retire at thirty-five.
Kristy and Bryce retired at thirty-two with over $1 million after saving 70 percent of their combined income. J. P. retired in New York City at twenty-eight with over $2.5 million by saving 80-plus percent of her income.
Brandon was able to do it at thirty-four by saving up to 85 percent of his income. I reached financial independence by saving and then investing at least 60 percent of my full-time and side-hustle income to reach $1.25 million.
While the thought of saving over 50 percent of your income might sound crazy right now, it's actually possible for most people if you are willing to make both saving and making more money priorities. As I've previously mentioned, I always viewed savings as an opportunity, not a sacrifice. Or as Brandon sees it: "It's not about deprivation, it's about optimization."
Read more: 7 things no one tells you about early retirement
Even if you don't make a lot of money, if you can reduce your expenses as much as possible and increase your savings rate, you can retire much earlier than you would otherwise. Although this is difficult to do, there are incredible stories of teachers, janitors, public service officials, and others who super-saved their way to early financial independence.
Literally every 1 percent more you save will decrease the amount of time you'll need to work to reach financial independence. Remember that retiring any time before sixty-two (the traditional retirement age) is early retirement, so cutting one, two, five, or ten years off your retirement is an incredible accomplishment.
Adapted from "Financial Freedom" by Grant Sabatier, copyright (c) 2019. Published by Avery, a division of Penguin Random House, Inc.
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