Here you are, wanting to take a risk…
…start a business
…switch from full-time to freelance/gig employment
…travel without employment
…go back to school
…prioritize family over work
…or take a new career path.
The best thing you can do for yourself today is to start saving up that Freedom Money. A pot of money where you aren’t required to have a job or a specific salary before you can take a risk. Or the pot of money where you can (not literally) say FU to a job or a situation that isn’t fulfilling you.
1 – Trim your small expenses: dining out, buying new clothes, or those no-brainer Target purchases. Once you start reducing these nonessential expenses, you’ll see how much you don’t need them. When I was working full-time, it wasn’t uncommon for me to spend $200/month on clothes. Current me is shaking my head and finger at younger me. Now I own mostly classic pieces with a few fun pieces, and I rarely buy new clothes.
2 – Tackle the big expenses: rent, car lease, etc. Can you move to a cheaper apartment? Maybe there is one in your building that you can transfer to quickly. Or plan to find something less expensive at the end of your lease. Years ago, I wanted a two bedroom apartment to have a guest room for visitors. Instead, I found a one bedroom in a building that had a guest suite you could rent for $99/night. The one bedroom was $400/month cheaper than the two bedrooms. So even if I rented the guest suite for four nights per month, I was still ahead. In the year I lived there, I only rented the guest suite for two nights. Can you live with a cheaper car or no car at all? There are so many sharing apps that exist (car2go, Turo, B-Cycle Bikes, Bird scooters) or take Lyft or public transportation. Remember to factor in all the expenses associated with cars (loan payment, insurance, gas, maybe parking).
3 – Eliminate debt: credit card debt, car loans, student loans. There are two strategies, and both are good. You can pay off the smallest debts first; this strategy gives you a quicker sense of accomplishment as you can make more final payments sooner. The other strategy is to pay off the debts with the highest interest first; this will reduce the overall amount that you will pay, but you may not make a final payment quickly.
4 – Track everything and celebrate milestones: Saving isn’t exciting, and a big goal of $20k may take a bit to get to, so identify some milestones and rewards. Maybe at $1k, you get a nice dinner or bottle of wine, perhaps $5k is a clothing splurge.
Either way, anything you can save now will give you more freedom in your future. It will also reduce pressure to maintain a specific salary for your lifestyle and reduce financial anxiety.