As Didi says in the novel (Findependence Day), “There’s no point climbing the Tower of Wealth when you’re still mired in the basement of debt.” If you owe credit-card debt still charging an usurous 20% per annum, forget about building wealth: focus on eliminating that debt. And once done, focus on paying off your mortgage. As Theo says in the novel, “The foundation of financial independence is a paid-for house.”
Earlier this fall, I gave a short interview to robo-adviser/light advice firm NestWealth.com about financial independence, ETFs and the term I often use in Findependence Day: guerrilla frugality. You can find it here.
I first used the term “guerrilla frugality” in a personal finance column in the Financial Post. The idea was that early retirement (or findependence) requires a sort of super-frugality.
Guerrilla warfare and guerrilla marketing are both phrases already in the public lexicon. I reasoned that as consumers, we’re constantly besieged by the “guerrilla marketing” efforts of well-heeled advertisers and stealth marketers. So in order to spend less than you earn consistently, in order to save and invest the difference, you need to become super-frugal and practice “guerrilla frugality.” (Note, it’s not “gorilla,” which some readers have mistakenly used in their correspondence with me. Gorilla is the ape!)
In the book, we talk (in war terms) of donning the battle fatigues of the “Frugality Guerrilla,” which we shortened to “Frooger.”
I’ve used the photo of a brown-bag lunch to illustrate this blog, since the character in the novel starts to brown bag it once he decides he wants to be “findependent” by age 50. In his guest post here at the Hub last week, millennial Sean Cooper also describes how he “brown bagged” it (among many other frugal endeavours) to accelerate his mortgage pay down campaign.
Formal definitions in the Glossary of the new ebooks
In the glossary to two new e-books published earlier this month, we offer these two definitions:
Guerrilla Frugality: A term invented by the author to describe the “warlike” mentality of being super-frugal in order to resist the strong consumption messages of America’s markets and advertisers.
Frooger (Frugality Guerrilla): An invented term in this book describing anyone highly committed to being frugal and saving money.
US fee-only financial planner Sheryl Garrett used the term “frooger” in both her foreword to the US edition of Findependence Day, published in 2013, as well as the new US ebook. Because it appears near the front, you can read Sheryl’s foreword free by clicking on the “Look Inside” feature on either the full book or the abbreviated e-book edition.
In many ways, financial independence is intimately linked with the related themes of voluntary simplicity, inconspicuous consumption and what we call (in the books and e-books) guerrilla frugality.
But the author of today’s linked blog also has a nice definition:
“Becoming financially independent means having enough money, so that it doesn’t become the main concern or worry in your life. It means having enough money to freely live your life on your own terms. It means that the paycheck doesn’t have control over you anymore and that you can experience life freely and openly.”
Hard to argue with that definition.
So how to you achieve it? The secret is simplicity itself:
“… You achieve financial independence when your income is significantly higher than your needs.
They say one example is an aberration, but two is a trend. If so, this week’s posts here at the Hub and sister site Findependence Day indicate a growing pattern: the millennial generation is picking up on the “Findependence” meme and taking steps to establish early Financial Independence.
They don’t talk about classical “Retirement” decades hence but instead have set their sights on financial independence in their 30s. For both of them, real estate is an early ingredient. And both give credit to the book, Findependence Day, for being inspired to do this. (One of the central tenets of the book and new e-books is that the foundation of Financial Independence is a paid-for home.)
And today, Friday, another millennial — Saxon Funk, pictured above — describes how he too plans to parlay frugal living and real estate into early Financial Independence. Saxon even noted that at 28, he is the same age as when Findependence Day protagonist Jamie began his 22-year journey to Financial Independence.
There must be many more millennials out there who have similar aspirations. We’d love to hear from you and join our community. Please come over to the Hub, register, and email us at jonathan@findependenceday.com to tell us your story. Hopefully, you can help to inspire your less financially literate peers.
Considering that I once put an entire financial plan into a single tweet, it shouldn’t be too surprising that there exists a one-page guide to Financial Independence.
This one-page guide to Financial Independence is from J.D. Roth’s Get Rich Slowly site. (naturally, I would call it the one-page guide to Findependence!) Naturally, the strategy revolves around that most basic premise of personal finance: live below your means and spend less than you earn: much much less. So that you can save much much more. Not just the modest 10 to 20% that most people shoot for in their IRAs or RRSPs: Roth suggests saving at least 50% of your income, and preferably up to 70%.
Extreme? Indeed, Roth calls it Extreme Saving but that’s also the kind of savings levels that Extreme Early Retirement gurus like Mr. Money Moustache and Jacob Lund Fisker advocate. The latter’s book can be found here.
As per the philosophy of this site, I would call this Extreme Early Findependence, not Extreme Early Retirement, which is why we call one of our soon-to-launch discussion forums Extreme Early Findependence.
While most homeowners won’t pay off their mortgages and reach financial freedom until right before retirement, I plan to do it a lot sooner — by age 31. I’ve managed to accomplish this in Toronto, Canada’s second most expensive housing market. How did I do it? Through frugal living, sacrifice and hard work. I was inspired to reach my “findependence” so early after reading Jonathan Chevreau’s book, Findependence Day: How to Achieve Financial Independence: While You’re Still Young Enough to Enjoy It. Here’s my story of how I plan to reach mortgage freedom and findependence and how you can, too.
My Journey Towards Mortgage Freedom and Independence
Sean Cooper
Owning a home has been a goal of mine ever since a young age. My lifelong goal of homeownership became a reality when I purchased a beautifully-renovated bungalow in the suburbs of Toronto in August 2012 for $425,000.
Buying a home at such a young age took a lot of sacrifices, but it has been well worth it. Instead of living on the main floor, I rent it out and live in the basement. I was inspired by the host of HGTV’s Income Property Scott McGillivray, who lived in the basement of his first house for nine years to get financially ahead. In my spare time I work as a freelance financial journalist.
Even after graduating from university, I continued to live like a student. I didn’t go out and buy a fancy car or go on a five-star vacation – I continue to ride my bicycle to work, pack my lunch and shop at discount grocers. Those savings alone add up to thousands a year. Instead of renting an expensive condo downtown, I was fortunate enough to be able to live at home, paying my parents rent, saving towards a down payment.
While not everyone can afford to buy a house at age 27 and be able to make the sacrifices I’ve made, there are still things you can do to help pay down your mortgage sooner and reach findependence.
Pay Yourself First
In the words of David Chilton, you should “pay yourself first.” I’ve been able to pay down my mortgage through pre-payment privileges. Most closed mortgages come with pre-payment privileges that allow you to make lump sum payments and increase your payment. The easiest way to pay down your mortgage is to pay yourself first: set up automatic withdrawals from your bank account, so you’re not tempted to spend. You’ll save thousands in interest over the life of your mortgage and be mortgage-free years sooner. Ease yourself into it – see what money you can afford to contribute right now towards your mortgage. Even an extra $25 a week can shave years off the life of your mortgage.
SMART Goal Setting
I’m a big fan of goal setting. Through goal setting I’ve been able to realize my lifelong dream of home ownership. Goals are most effective when they’re SMART (Specific, Measurable, Attainable, Realistic, and Timely). For example, if you’re saving towards a home, by putting aside an extra $200 per week in your savings account, you’ll have $10,400 saved in a year that you can use towards a down payment or a lump sum payment against your mortgage.
Create a Budget and Track Spending
It’s hard to know if you’re on your way to reaching your financial goals if you don’t have a budget. A budget is the most basic tool and effective tool for managing your money. Are you guilty of living paycheque to paycheque? Do you often wonder where your money goes each month? Not only can a budget help you gain control of your finances, it can help you achieve your long-term goals, like mortgage freedom.
A budget acts as a roadmap that helps you stay on course. Creating a budget doesn’t have to be complicated. It can be as simple as a Microsoft Excel spreadsheet. Just creating a budget can often lead to savings. You may be surprised how much you spend a month on coffee: by saving $2 a day, you’ll have $60 extra a month to put towards your mortgage.
While a budget is helpful, don’t forget to track your spending. Tracking your spend is vital to ensure you’re not going over-budget every month and putting your dreams of mortgage freedom in jeopardy.
Live Frugally
There’s a difference between frugal and cheap. Today it’s hip to be frugal. Being frugal means having the willpower to say no to spending from time to time. Changing a few costly spending habits can lead to big savings.
Rather than spending $10 everyday buying your lunch, why not brownbag your lunch instead? You’ll eat healthier and save a bundle. Instead of driving to work, why not take public transit or bike like me? The savings can add up quickly.
Frugal doesn’t have to mean being boring. You can still have an active social life. Instead of going to a pricey restaurant, you can host a potluck or have a picnic in the park.
Streams of Income
While living frugally can help save money, if you want to reach mortgage freedom sooner, boosting your income goes a long way. There are many ways you can bring in extra income: renting out your home, working part-time, or freelancing.
If you have some spare time in the evenings and on weekends, why not put it to good use by getting a part-time job? Rather than using your basement for storage, you could transform it into a rental suite and start bringing in a steady stream of income. With the extra money, subsidize your mortgage and make lump sum payments against your mortgage to pay it off years sooner.
If you’re willing and able to make a few small sacrifices, you can reach mortgage freedom and financial independence a lot sooner like me. You can work because you enjoy working, not because you have to.
Sean Cooper is a Personal Finance Expert and Financial Journalist. He is a first-time homebuyer and landlord who aspires to reach findependence by age 31. Follow him on Twitter @SeanCooperWrite and read his blogs and request his Writing and Web Design services on his website: http://www.seancooperwriter.com/
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Earlier this fall, I gave a short interview to robo-adviser/light advice firm NestWealth.com about financial independence, ETFs and the term I often use in Findependence Day: guerrilla frugality. You can find it here.
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