By: Cody | FlytoFi.com
I’m 7 months into my first corporate job and I just can’t take it anymore — the long commute, the unfulfilling work, the lack of autonomy. This can’t be what the next 40 years look like, can it?
Trust me, I’ve heard the “welcome to the real world” spiel from every single family member, friend, colleague, random guy on the street … you name it. Unlike them, though, I believe that there is more to life than sitting behind a computer for 40+ hours per week.
There has to be!
Fortunately, I’ve found a way out by combining a few fundamental concepts:
- intentionality, and
These lifestyle choices have put me in a position to quit my corporate role and pursue my passions. Once you discover how powerful this combination can be, your possibilities are endless.
Where Did My Money Journey Begin?
I grew up in a middle-class family in a small town in central Massachusetts. I was extremely fortunate that both of my parents were decent with money and taught me the basics of saving and investing.
From an early age, I quickly became obsessed with money. I wanted to know how to make more, save more, and invest more. Seeing the numbers in my bank account increase by $5, $10, or $20 gave me a rush.
All throughout grade school, middle school, and high school, this same mindset consumed me. How could I maximize that number in my bank account?
It’s probably no surprise to you that I chose my college major through the following process:
- Google “What major has the highest income potential with a Bachelor’s degree?”
- See ‘Finance’ on the screen
- Run with it
This was it. I was going to be an investment banker on Wall Street raking in a handsome $150k my first year out of college. I was going to be rich!
During my first two college years, I reached out to nearly 400 finance professionals on LinkedIn and kept a diligent Excel spreadsheet to track each interaction. It was insane.
I studied hard, participated in extracurriculars, networked A TON, and was fortunate to land internships after both my freshman and sophomore year.
Everything was going according to plan… then suddenly, it all changed when I discovered the FIRE (Financial Independence, Retire Early) movement in the first semester of my junior year.
Time > Money
What in the world was I thinking?! I was ready to give up 80+ hours of my week trapped behind a desk for what? The money? What good was money when I didn’t have the time to do any of the things I enjoy?
After immersing myself in transformative FIRE-related content, I quickly realized that time was our most valuable asset, not money. Money was just a tool to help us design and craft our ideal lifestyle.
You’ve probably heard the adage “nobody actually wants a million dollars; they just want to live like a millionaire”. This is true on the deepest, most fundamental level.
Most people want the freedom to travel, spend time with family, live care-free and all of the other benefits associated with the millionaire lifestyle – not the pile of cash.
Unfortunately, freedom and exorbitant wealth are too often conflated and people end up spending 40+ years stuck behind a cubicle “chasing the dream”. Life doesn’t have to be this way, but media-inspired consumerism has been trapping millions of people for many decades.
Consumerism is the enemy of freedom.
Choosing Life Over Money
At the time of my FIRE discovery, I had already received multiple offers for investment banking internships and other high-caliber finance positions. Most of these positions would have set me up for 80-90 hour workweeks and all-in full-time compensation between $100K and $125K.
Sounds nice, right?
Despite the cushy pay, I would have little to no time for the things that I truly value like family, relationships, and travel.
I ultimately decided to reject all of these offers and accept a lower-paying corporate banking position with a better work-life balance. Needless to say, everyone told me I was an idiot.
I worked for three months in that internship and received a full-time offer at the end of summer. Although I certainly didn’t love sitting behind my desk for 8+ hours, I thought the job was tolerable, so I accepted.
Planning My Escape
During the final two years of my college career, I started side hustling like crazy. I knew that if I wanted to escape the corporate lifestyle, I needed to diversify my income streams. I also knew that I would need to save as much money as reasonably possible in order to build a financial runway.
By the time I started my full-time job, I had founded a disc golf company and launched a financial independence blog and podcast. Although these were only earning a few hundred dollars per month, the income diversity laid the foundations for my escape.
After the W2 paychecks started to roll in, I was able to save between 80 to 85% of my income. This was made possible due to a variety of intentional choices that drastically reduced my cost of living.
A Look into the Numbers
To give you a better idea of my actual finances, I’ll break down my monthly spending and income streams.
Housing: $0/month. After graduation, my mom let me move back into the house. This was by far the most powerful expense-reducing choice I made. It has saved me thousands of dollars!
Auto/Transportation: $600/month. Each month I pay $360 for a monthly train pass into Boston (the commute is brutal), $120 on car insurance, and around $120 on gas.
Although this seems high, it’s much more cost effective than driving into work which would cost about $300-400 on gas per month, $120 on insurance, $280 in tolls, and between $200-400 for parking. Yikes.
Food/Alcohol: $300/month. I can eat well on $30 per week through intentional grocery shopping. I typically load up on chicken when it’s on sale ($0.99 or $1.49 per pound) and then supplement each meal with a bunch of veggies. I also include personal hygiene items in this category (e.g. deodorant, toothpaste, razors, etc.).
The remainder of the $300 is typically spent on going out to eat and alcohol. I could cut this out completely if I wanted to, but I choose not to give them up for the social benefits.
Travel/Discretionary: $200/month. I love to travel. However, I hate spending money. I discovered the best of both worlds when I learned about the art of travel hacking and now I can travel the world for nearly free.
My discretionary spending is rare at best. Around the holidays is the only time I will purchase a non-essential material item. I’d rather put my money toward freedom!
All income streams are after-tax for simplicity.
W2 Banking Job: $4,800/month. Working in corporate banking definitely helps to accelerate how much financial runway I can build in a short amount of time.
Side Businesses: $800/month. Between the disc golf company, blog, and podcast I am able to earn an average of $800 per month.
Freelancing/Miscellaneous: $250/month. Most of this income is from random side jobs and projects I pick up throughout the year. Although this varies drastically from month to month, I converted my annual 2018 earnings into monthly figures for this analysis.
How Much Can I Save?
Total Monthly Earnings – Total Monthly Expenses = Total Monthly Savings
$5,850 – $1,100 = $4,850.
Since my annual expenses are around $11,000 per year, I am able to save a full year’s financial runway in approximately 2.8 months. Let me show you how this intentional frugality has drastically accelerated my ability to build a financial runway.
Income: $5,850 * 12 = $70,200
Gap: $70,200 – $13,200 = $57,000
Time to Build One Year of Financial Runway: $13,200 / $57,000 = .23 years (2.8 months)
Imagine now, that I spend $60,000 per year on average. If my income remained flat, it would take me nearly 6 years just to build up one year of financial runway!
Income: $5,850 * 12 = $70,200
Gap: $70,200 – $60,000 = $10,200
Time to Build One Year of Financial Runway: $60,000 / $10,200 = 5.88 years (70.6 months)
Frugality is a powerful tool once you understand how the numbers work.
The Current State of Affairs
Let’s bring this back full circle. On January 14, 2019, I put in my notice to quit my corporate banking job. My final work day is January 31st.
Since I started, I have been able to save around $30,000. This is equivalent to nearly 2.3 years of annual expenses! Frugality can truly buy freedom.
Let’s compare my situation to alternate scenarios with higher annual expenses.
Even if I were to move my annual expenses up to $20,000 per year, this would reduce my financial runway by more than 9 months! At $30,000 in annual expenses, I’d be cutting my financial runway down to only one year!
Since I plan to keep my expenses consistent (~$13,200 per year…or less), I have created 2.3 years of financial runway to pursue my entrepreneurial ventures. In the worst case scenario where I earn a total of $0 pursuing my passions, I can always return to the corporate world.
But again, none of this would be possible if I spent every dollar that I earned. Understanding the connection between frugality and freedom is instrumental in designing your ideal life.
How Can Frugality Buy You Freedom?
I didn’t write this post to brag about how little I can spend and how much I can save. I shared my story because I want to show you what is possible.
A recent Forbes study revealed that 70% of Americans either dislike or are actively disengaged with their jobs. But life doesn’t have to be this way! If you can save 1, 2, 5, or even 10% more than you are currently saving, you can vastly increase your financial runway and options in life.
Your financial life is a constant tug of war between your freedom and your spending.
Every single dollar that you spend pulls against your financial freedom, and every dollar that you choose not to spend expedites that freedom.
Regardless of your age, sex, race, marital status, religion, and a host of other factors, there is some way for you to reduce your annual expenses. Whether it’s downsizing your home or cutting out your weekly Starbucks coffee, every dollar you save buys you freedom in the future.
Are you willing to push back against consumerism and buy back your most valuable asset: time?
Cody is an entrepreneur who runs the personal finance blog Fly to FI and hosts The FI Show podcast. Aside from financial independence, Cody is also passionate about fitness, travel, and relationships. He aims to live a life of intentionality and purpose and to spread financial literacy to all who will listen.