Disclaimer: I am not a financial advisor. The strategies in this post are based on personal experience and what I’ve learned from books, podcasts, articles, and videos. Always do your own research or consult a certified professional before making any financial decisions.
Related Reading
If you’re interested in building wealth gradually, this guide on budgeting with the 50/30/20 rule offers a practical foundation.
TL;DR: Key Takeaways Before We Dive In
- You don’t need to earn six figures to build wealth.
- Automating savings and living below your means are critical.
- Financial independence is more about habits than income level.
- Simple investing strategies work better than chasing trends.
- Tracking expenses and staying informed make all the difference.
Introduction: Why I Started This Journey
Like many people, I used to believe that financial freedom was only for the rich. But after diving deep into books like Your Money or Your Life by Vicki Robin and podcasts like ChooseFI, I realized that financial independence is achievable even on a modest income. This blog post is for beginners like me—those just starting the journey, eager to learn, and ready to take control of their money.
1. Setting a Clear Definition of Financial Freedom
What Does Financial Freedom Mean to Me?
To me, financial freedom means having the ability to make life choices without being overly stressed about money. It doesn’t necessarily mean early retirement. Instead, it’s about reaching a point where my basic needs and modest desires are met by passive or semi-passive income.
How I Calculated My Freedom Number
- Monthly expenses: $1,500
- Annual expenses: $18,000
- Target retirement portfolio (using the 4% rule): $18,000 / 0.04 = $450,000
Learn more about the 4% rule here.
2. Budgeting Like a Minimalist (Without Feeling Poor)
How I Track Every Dollar
I use You Need a Budget (YNAB) to allocate every dollar to a category. It helps me:
- Avoid overspending
- Build an emergency fund
- Prioritize saving goals
Other free options include Mint and Spendee.
Embracing Frugality, Not Deprivation
Cutting expenses doesn’t mean living miserably. For example:
- I swapped gym memberships for home workouts
- Cooked meals at home using budget-friendly recipes
- Shared Netflix and Spotify accounts with family
According to Statista, over 50% of Americans aged 35 and below have less than $1,000 in savings. This stat pushed me to prioritize saving more each month.
3. Building an Emergency Fund Before Investing
Before putting any money into stocks or crypto, I built an emergency fund worth 3-6 months of expenses. I keep it in a high-yield savings account like Marcus by Goldman Sachs or Ally Bank.
Why This Step Matters
Having an emergency fund gave me peace of mind and reduced the chances of dipping into investments prematurely.
4. Automating My Savings and Investments
Pay Yourself First
Every month, I automate transfers so my savings go out before I get the chance to spend. Here’s how I do it:
- 20% to a Roth IRA via Fidelity or Vanguard
- 10% to a sinking fund for travel and hobbies
- 10% to a general brokerage account invested in ETFs
What I Invest In
My investing strategy is Boglehead-inspired:
- 60% in a total U.S. stock market index (VTI)
- 30% in an international index (VXUS)
- 10% in bonds (BND)
According to Morningstar, long-term returns for diversified portfolios still average around 7% annually.
5. Learning Constantly: Books, Podcasts, and Tools I Use
Books
- Your Money or Your Life by Vicki Robin
- The Simple Path to Wealth by JL Collins
- I Will Teach You to Be Rich by Ramit Sethi
Podcasts
Tools That Help Me Stay on Track
- Personal Capital for net worth tracking
- Zogo Finance for gamified financial literacy
6. Staying Accountable Without a Financial Coach
Since I can’t afford a financial advisor, I built my own system of accountability:
- Monthly check-ins: I review my budget and net worth
- Financial goal setting: I set quarterly milestones
- Online communities: I’m active on Reddit’s r/financialindependence and Bogleheads Forum
7. Adjusting the Plan When Life Happens
I’ve learned that this journey isn’t linear. There are months when I save less due to unexpected expenses. That’s okay. The key is consistency over perfection.
According to a 2023 Fidelity study, Americans who consistently saved 15% of their income were far more likely to retire comfortably—regardless of income level.
FAQs: Financial Freedom on a Low Income
1. Can I really reach financial independence on a low salary?
Yes. It might take longer, but living below your means and investing wisely makes it possible.
2. How much should I save each month?
There’s no magic number, but aim for 20-30% of your income. Start small and increase gradually.
3. What if I have debt?
Pay off high-interest debt first (like credit cards). Consider tools like Undebt.it to create a personalized debt payoff plan.
4. What’s the best investment for beginners?
Broad-market index funds or ETFs like VTI or VT. They offer diversification with low fees.
5. Should I wait until I earn more before I start saving?
No. The habit of saving matters more than the amount. Even $20/month builds discipline.
Final Thoughts: Start Where You Are
Reaching financial freedom on a low income isn’t just a dream—it’s a decision. I’m still learning, making mistakes, and tweaking my approach. But if there’s one thing I’ve realized, it’s this: Consistency beats perfection.
If you’re just starting this journey, my advice is simple: start tracking, start saving, start learning.
