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Self-made millionaire: If your goal is to be financially independent, ask yourself 4 questions

"At the end of the day, the better you know yourself, the easier it is to manage your money."

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Grant Sabatier.
Courtesy Grant Sabatier

Like any other financial philosophy, the so-called "FIRE" movement has no shortage of experts and thought leaders eager to share their blueprint for success. Fans of FIRE (which stands for "financial independence, retire early") embrace the idea of saving the vast majority of their income in their 20s and 30s, in order to retire or focus solely on hobbies and passion projects in their 30s or 40s.

And if you're interested in FIRE, chances are you've heard of Grant Sabatier. The author of "Financial Freedom" and founder of websites Millennial Money and BankBonus.com is one of the movement's prominent success stories, having stashed away over $1 million in just five years by launching several side hustles and saving more than 80% of his income.

Yet unlike many of his peers, Sabatier doesn't believe his path to financial independence should be used as a roadmap.

"One of the mistakes people make is that they see a YouTube video or a blog post, or read a book about how someone is living their life and think, 'That's how I'm going to live my life,'" he says. "That's always a bad plan."

It may seem logical to reach for an outside framework to apply to your finances, Sabatier says, but you're far more likely to find success if you start from a place of introspection. "It's easier to chase something than to stop and look at your life," he says. "At the end of the day, the better you know yourself, the easier it is to manage your money."

Here are four questions Sabatier suggests you ask yourself before pursuing financial independence as a goal.

1. How will money help me achieve my goals?

Sabatier recommends viewing money as a potential energy of sorts — a force that gives you the time and optionality to expand your activities and feel more alive. If you're starting without much money, don't get caught up in giving yourself a huge dollar figure to retire with, he says.

"If you're aiming for $5 million or $10 million, that's distracting. If you have nothing, get to $5,000. If you have $10,000, get to $50,000. Set the next threshold to go after, and do everything to get there as quickly as you're comfortable."

With each new level, consider how this amount of money materially impacts your life. "Once you have $10,000, think about how much freedom that gives you," he says. "Maybe it allows you to move out of your parents' house, or quit your job and try something else. You may think you want a lot more money, but it's important to ask yourself what you're doing with the freedom you already have."

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2. What am I willing to sacrifice?

Any FIRE adherent will tell you that the key to saving prodigiously is to keep spending to a minimum. "Every time you're spending money, you're not saving it," Sabatier says. "You're making a trade-off. You're sacrificing some future amount of freedom."

The problem that many folks run into, Sabatier says, is that they sacrifice present happiness for future wealth by depriving themselves of things that bring them joy.

"The easiest way to find that balance is to make a list of the things that make you happiest in life and figure out how much those things cost," he says. "Focus on spending on those things, and save on everything else."

You may think you want a lot more money, but it's important to ask yourself what you're doing with the freedom you already have.
Grant Sabatier
author, 'Financial Freedom'

For many people, the things that spark joy, such as playing board games with friends or having a beer and watching a basketball game, are inexpensive or free. It's not worth it, he says, to cut back on these small purchases and creature comforts. Instead, focus on making changes to the biggest line items in your budget.

"You'll save the most money where you spend the most: housing and food," he says. "Moving from a living situation that costs $3,000 a month to one that costs $1,000 a month is going to get you significantly ahead of where you'd be [after] cutting out your Netflix subscription."

3. How can I maximize my investments?

There's one place where you should absolutely cut costs: your portfolio. "Most of your money should go into a total stock market index fund," Sabatier says.

To maximize your investment returns, Sabatier recommends avoiding bonds altogether ("they're way too conservative for young investors and not worth considering") and investing sparingly in individual stocks. "You should think of stocks as a fun way to add some diversification to your portfolio," he says. "But the older I've gotten, the more I've realized that I'm not a bad individual stock picker, but the market eventually beats me."

Depending on where you are in your financial journey, it may also make sense to diversify into new streams of income, either in the form of a small business or real estate investments.

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"Starting a business is a way to diversify your income and get a lot of fulfillment in your life," Sabatier says. "I think you're going to see that emerge as a dominant narrative — people using their business to live life on their own terms."

For now, Sabatier says, the most popular way to establish financial independence is through owning property. "The vast majority of younger investors who have reached financial independence have done it through real estate, by owning three to five single-family homes," he says. "It's something I missed on my own financial journey. I probably could have gotten there faster by acquiring properties that kick off enough cash to cover living expenses."

4. How am I building my skills?

The FIRE movement is big enough at this point that it comprises many competing philosophies, but the overarching goal of its adherents is to feel fulfilled in life and to earn enough money to live the way they want.

Adding skills and trying different career paths early on makes you more likely to ultimately find a lucrative and fulfilling job, Sabatier says. "Skills are your future currency. The more skills you have, the more opportunities you're going to have to make more money."

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That doesn't necessarily mean going back to school. "Everyone should know how to build a website, run a Google ad campaign, and understand branding and design," he says. "These are things you can learn for free on YouTube."

The earlier in life you can think about your relationship to these questions, the better your path to financial independence will be, says Sabatier.

"Saving a dollar at 22 is worth five times more than saving a dollar at 32," he says. "Saving when you're younger increases the power of the compounding engine. It really gives you a leg up over time."

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