Financial Freedom | Grant Sabatier

Summary of: Financial Freedom: A Proven Path to All the Money You Will Ever Need
By: Grant Sabatier

Introduction

Are you tired of the rat race and yearning for financial freedom? In ‘Financial Freedom: A Proven Path to All the Money You Will Ever Need’, Grant Sabatier shares his remarkable journey from unemployment and a bank balance of just $2.26 to becoming a millionaire within five years. This book summary will unveil the strategies he employed, defying societal norms and conventional wisdom to achieve his goals. By exploring topics such as calculating annual expenses, understanding your net worth, reevaluating purchasing habits, and setting up side businesses, you will discover the steps to follow on the path to financial independence.

Defying Norms for Financial Freedom

In 2010, 24-year-old Grant Sabatier found himself at rock bottom, unemployed, living with his parents, and with only $2.26 in his bank account. He calculated the challenges that millennials face, including lower average income and student loan debts. Recognizing that the traditional 40-year career path couldn’t guarantee financial stability, Grant realized he needed to break free from societal norms to achieve financial freedom. He immersed himself in learning about finance and reshaped his perception of money as a tool for generating wealth. Grant developed a strategic plan involving a full-time job, two side businesses, and stock market investments. Despite the demanding lifestyle and sacrifices, in just five years, he saved enough money to live off the interest – granting him financial freedom. By adopting Grant’s strategy, you too can work towards achieving financial independence and future stability.

Harnessing the Power of Compounding

Embrace the eighth wonder of the world, compounding, by calculating your annual expenses and savings target. Determine the amount of money necessary to live comfortably and invest it in an account that generates interest. By following this strategy and living off just 4 percent of your investment, you’ll continue to grow your wealth and achieve financial freedom.

Einstein famously referred to compounding as the eighth wonder of the world. Compounding has an incredible ability to increase the value of your money over time, all without adding a single cent to your investment account. How? The interest generated on your account’s balance continually accrues, essentially earning you free money.

When Grant, the author, set out to save $1,250,000, his primary goal was to attain financial freedom by living comfortably off the compound interest generated. He determined the minimum amount needed to invest to yield a sufficient yearly income. Like Grant, the first key step toward financial freedom is to estimate your annual expenses.

Everyone has a unique vision for their life, meaning there’s no one-size-fits-all solution for calculating your savings target. For Grant, $50,000 a year allowed him to live comfortably in Chicago. Your target may differ based on your personal goals and lifestyle choices.

Begin by examining your ongoing expenses such as rent, mortgage, taxes, utilities, insurance, travel, education, food, and entertainment. Calculate the total cost of your annual expenses and incorporate any future expenses tied to major life events or aspirations. Finally, divide your total annual expenses by 4 percent to ascertain your principal – the amount needed to invest in a compounding account, providing a comfortable yearly income.

Living off just 4 percent of your compounded interest is ideal, as most interest rates hover around 7 percent. This approach not only allows for continuous growth and inflation coverage but also ensures the preservation of your principal investment.

Remember not to feel overwhelmed by a seemingly insurmountable savings target. Breaking the goal down into manageable portions and utilizing the power of compounding will steadily pave the way toward financial freedom.

Assessing Your Financial Launchpad

Before embarking on the journey to financial freedom, it’s vital to determine your net worth, which serves as a foundation for future financial decisions. Calculating your net worth involves tallying up your assets, assessing your liabilities, and subtracting the latter from the former. This starting point helps you strategize and provides motivation for consistently tracking your financial progress.

Every great adventure begins with a starting point, and the path to financial freedom starts with understanding your net worth – your overall financial value. Recognizing your net worth is crucial to maintaining financial independence, as it shapes your financial strategy and helps you gauge how far you need to go to reach your savings goals.

To find your net worth, start by examining your assets – anything you own with monetary value. Make a comprehensive list of all your valuable possessions worth over $100, and estimate how much you’d earn if you sold them. Include everything from bank account balances and pension funds to cars, real estate, art, and jewelry. Add up the numbers to determine your total assets’ value.

Next, assess your liabilities – the amounts of money you owe, such as credit card balances, mortgages, and student loans. Compile a list of all your debts and sum them up to define your liabilities.

Once you’ve calculated both your assets and liabilities, subtract your liabilities from your assets to find your net worth.

Don’t worry if your net worth is negative. You can still factor in your debt by adding it to your savings target; that’s how Grant began his journey to financial freedom. Conversely, if your net worth is positive, subtract the income generated by your assets from your savings target and start investing this amount right away, moving closer to your financial goals.

Finally, spend five minutes each day keeping track of your net worth. Although it may seem like a chore initially, as your wealth grows, this daily habit will boost your motivation to save and work towards financial freedom.

True Cost of Your Purchases

Daily comfort purchases seem harmless, but when aiming for financial freedom, you must evaluate them differently. Understand that the true cost of an item isn’t its price tag, but the number of hours you invest working to afford it. To make informed decisions, calculate your actual hourly income rate by factoring in unpaid work-related activities. With this knowledge, you can better judge whether a purchase is worth it and curb impulse buying, allowing you to save and invest toward a financially secure future.

Small things like a cup of coffee in the morning seem innocent enough on their own and can bring some happiness to your day. But when you’re chasing financial freedom, it’s essential to shift your perspective on what you buy. The real cost of any item doesn’t lie in its monetary price, but rather in the hours of your life you have to work to afford it. With this in mind, every purchase decision becomes more significant.

It may not feel like a big deal to spend $15 a week on coffee, but what about larger expenses, such as new clothes, vacations, or a car? How many work hours will it take to pay for those? And, are you sacrificing potential compound interest by spending instead of investing? By viewing items in terms of your life’s hours, their actual cost becomes clearer.

To make smart decisions about your purchases, you need to know your genuine hourly income rate. This entails calculating your weekly income and the hours you work. However, it’s crucial not to sell yourself short. Take into account the unpaid hours spent on work-related tasks, including commuting, ironing, attending events, or destressing. Considering these factors, your hourly rate might be lower than you initially thought.

With the knowledge of your true hourly income, you can ascertain the real cost of each item, which can help curb impulse and emotional buying. Instead, focus on the compound interest that money could generate if invested, bringing you closer to financial freedom and early retirement. Ultimately, being aware of the true cost of your purchases can reshape your spending habits and propel you towards a more secure financial future.

Master the Big Three Expenses

It’s no secret that saving money is challenging, but the key to increasing your savings lies in managing the largest costs – housing, transport, and food. Trimming your expenses in these three areas allows you to set aside nearly 25% of your income, accelerating the journey to reach your financial goals.

Budgeting can be frustrating, as many feel guilty when they fail and often give up altogether. Instead of focusing on every minor detail, it is more efficient to target the larger, ongoing expenses. By tackling the Big Three – housing, transport, and food – you can significantly optimize your savings and control spending.

Approximately 60% of an average American household’s income is allocated to these areas. Imagine if you could decrease this portion to just 30%. Doing so would free up an additional $17,500 per year to invest, which, over twenty years, would accumulate to a remarkable $835,000. Curious about how to achieve this? Let’s dive in.

First, housing expenses can consume about a third of your income. Aim to downsize or relocate to a more budget-friendly neighborhood, even if only temporarily. Reducing your housing costs for a few years provides a substantial boost to your savings.

Next up, transport expenses entail not just the price tag of a vehicle or loan payments, but also fuel, maintenance, and insurance costs. Exploring alternatives like public transportation or car-sharing services can help you avoid these excess expenses. If those options don’t suit you, consider buying a scooter or moped, which is not only cheaper but also cooler and more enjoyable.

Lastly, food costs can be trimmed through a combination of smart online shopping and dining habits. Online retailers often offer discounts for recurring orders, so identify the products you regularly consume and commit to scheduled purchases with these discount programs. When dining out, seek promotional offers and avoid pricy beverages by sticking to tap water.

By earnestly addressing these three major expenditures, you can save at least 25% of your income and drastically expedite the time it takes to achieve your financial goals. Implementing these strategies may seem daunting at first, but remember – mastering the Big Three is a smart, practical approach to financial success.

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