Extreme frugality: Save 50-75% of your nett take home

silver round coin on white ceramic pig coin bank

If you’re able to identify spendings that doesn’t help you one bit other than retail-short-term-therapy, going the extreme frugal approach will be able to accelerate your early retirement journey by a couple of notches.

An example, if you earn net $5,000 a month and you’re able to save 60% of it so that means you can save $3,000 a month (save $36,000/year) and live on $2,000 a month (spend $24,000/year)

  • if you take Trinity study on retiring early on 25x annual spending, that means you need to accumulate $600,000
  • if you invest $36,000 a year in a conservative 5% ROI per annum and reinvest the 5% year-on-year
  • you can retire within 11.05 years:

The upside on this frugality as a wealth accelerator approach is:

  • it’s doable, as it’s based on your current salary / take home
  • especially easy to do if you’re already spending a shitload on stuff that doesn’t increase your passive income investments that doesnt make you happy
  • the lower your living expenses, the lesser and lower you need (hence faster to early retire)
  • the more you practice frugal approach, the more it becomes a natural lifestyle (and you find joy in other non-spending activities, which is great haha!)

The downside?

  • there is only so much you can save, so this approach works if you earn a decent amount and don’t live in a high cost of living area. If you dont earn enough, this approach clearly doesnt work.
  • it can be a little hard in the beginning, especially if you’d been a spender (note: you dont have to become a miser and cut back on everything though, you just have to be much more selective on your real priorities).
  • it can be a “downer” if you really like being generous with others and yourself

But Nigel, how can you save so much??

Of course it’s not that simple at times, so bearing in mind variables which includes:

  • your city’s cost of living
  • your income
  • your spending
  • number of dependents
  • etc

Everyone’s circumstances IS different, I admit, so you have to pick and choose which battles you can win so that you can win the overall war (financial freedom and early retirement war).

You can live a much better and happier life than those whose focus are centered around

  • luxury
  • convenience and
  • following the financially illiterate of the TV/social media/Netflix-watching middle class

Happiness is personal and comes from different sources, but i can assure you, it doesnt always involve spending more.

No matter what the masses or TV tells you, the truth of the matter is, what I shared with you above is not something new – it just works.

You can amass your own savings and invest for passive income, as the author of Richest Man in Babylon says, to have a jingling heavy purse and a lighter heart.

Millions of people are fixing their money and lives these days, and the earlier you can understand and accept this, the sooner you will get rich and free financially.

Big Chunk Savings: Save where it moves the needle

Some of the “big chunk savings” tactics include:

  1. Live closer to work so that you can save time traveling to work, ideally in a bicycle or by walking.
  2. Buy or rent a smaller space – if your current space has additional rooms that you’re not using or you’re using as storage, then it’s not good use. Either move to a smaller space or rent out the room (legally, of course). Invest the profits plus save on loan interests too!
  3. If possible, move to another city / state with lower costs and taxes.
  4. Don’t borrow to buy cars and more importantly dont buy stupid expensive ones.
  5. Drop the habit of buying a new overpriced cell phone and gadgets every year, and use/drag it every 2-4 years. Buy the best, and use them as long as possible.
  6. Question your spending habits: if it’s a need and you love it? Buy. If it’s not going to be used and just looks shiny, eh, no need.
  7. Set 30% of your income to be banked automatically into another account that is hard to access and ideally, goes straight into a no-frills investing account with at least 5% dividends returns per year.

So many more ideas, but these are some that are off the top of my head and these are the big chunk already that can help you save at least 30-50% of your paycheck, just in 7 items.

Keep going and you can save more, especially for those with above average incomes.

What do I do with all this money?

You invest it for passive income. Go here to read more.

Can I splurge?

Of course – who wants to live a sad, depressing, miserly life?

Lol, kidding, I dont associate buying things with happiness BUT I do spend and splurge on shit I care about. And that’s what I say to you:

  • kill off spending on shit you dont care about
  • invest aggressively to get you passive income which will afford you shit you care about

I’m not gonna stop you from buying lattes, or taking vacations etc.

Instead, I prompt you to ask

How can you afford it?

I purchase assets that pays me passive income that helps me

  • buyback time by either working less or having less need to work for money
  • pay for vacations, luxuries, expenses etc

Doesn’t that sound nice?

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