digest
Short Summary
Main recommendation: Pair financial minimalism (cutting out spending that does not add to your enjoyment or well-being) with ways to increase your income, rather than relying on saving alone, so you can reach financial independence while still living a fulfilling life now. Graham Stephan argues that cutting expenses only goes so far, so the two approaches work best together.
Key Points
- Financial independence depends on two numbers: how much you spend per year, and how much you have invested to cover that lifestyle. Lower spending means a smaller investment target.
- Each dollar cut from spending is worth roughly $1.30 in pre-tax earnings, because you would otherwise have to earn more and pay tax on it.
- Using the safe withdrawal rate of 25 to 30 times annual spending, $40,000 a year requires about $1,200,000 invested, so every $1 of yearly spending needs about $30 invested. Stephan cites a $200 monthly car payment as needing about $72,000 invested, and $100 a month in dining out as needing about $36,000.
- Saving has limits, so raising income matters once you cannot cut further without sacrificing what is important to you.
- Build the life you want first, then save for it, leaving room for new experiences and changing priorities rather than saving endlessly for a distant future.
Details Worth Noting
- Concrete instructions:
- Ask for a raise. Stephan says he has done this several times, including negotiating his commission split as a real estate agent and charging more for his own services.
- Consider switching companies. Citing Forbes, he says companies start new hires from a base salary and raise it by a percentage, so moving to a new company can start at a much higher base. He cites multiple studies claiming people who switch jobs every two to three years earn nearly 50% more than those who stay with one company.
- Consider going back for education to build skills and demand a higher salary, especially when switching companies or asking for a raise.
- Start a side hustle or side business to earn money during time you might otherwise spend on other activities.
- Figure out what you want your life to be, estimate what it will cost, then plan savings and investment goals around that. Check that goals are not driven by impressing others.
- Track all expenses, save and invest as much as you can, and keep your lifestyle steady while income rises so the extra money goes into investments.
- Stephan's own example (his personal experience, not a guaranteed path): he lived frugally, invested, bought real estate, grew his income as an agent, kept his lifestyle the same, and then started a YouTube channel while still working as an agent, giving up some commissions.
- He mentions a Reddit thread titled "Build the life you want and then save for it" that he found insightful.
- He suggests that if you are happy at your current company, staying is fine, but looking elsewhere may reveal a better offer.
- He stresses that cutting back and saving are typically the fastest, most immediate levers because you control them directly.
Bottom Line
Financial minimalism works best as one half of a plan: cut what does not add value, but also grow your income so you can keep living well while building investments.
