As the COO of a major financial website operating in 23 countries and serving over a million monthly visitors, I’ve spent the last 8 years deep in the world of personal finance.
I’ve authored hundreds of articles on money management and trained numerous financial experts.
While I haven’t reached millionaire status yet, I could sustain myself for the next decade without working if I wanted to.
I’m not here to tell you to become extremely frugal – instead, I want to share practical knowledge that can transform your financial future.
The Simple Formula for Building Wealth
The path to financial freedom follows a straightforward formula:
- Reduce expenses
- Increase income
- Invest the difference
By living significantly below your means, you create freedom and independence from traditional employment constraints.
Let’s break down this four-step approach to mastering your finances:
Step 1: Gain Awareness
First things first – you need to know what the hell is happening with your cash. Make a list of everything coming in and everything going out. And I mean EVERYTHING.
Pull up your bank and credit card statements and look at every single transaction.
Just spend 10 minutes actually looking at it. Most people skip this part because it feels uncomfortable and they would rather not know.
If you look at your spending and think “Holy shit, I spent HOW much on DoorDash last month?” – good. That means you’ve got plenty of room to unfuck your finances.
Step 2: Stop Wasting Money on Stupid Shit
Crucial insight: reducing expenses is more powerful than than increasing income.
Why? Because savings multiply over time. One hour spent saving $200 per month becomes $2,400 per year.
If I asked you to spend 1 hour to earn $2,400, would you do it?
Of course you would.
Focus on the four major expense categories
The top3 expenses for most people are housing, transportation and food. You can check it on your own statement.
Finding a good apartment deal, biking instead of driving and eating out less can save you a lot of money.
Think about it: Eating out ten times a month at $50 a pop? That’s $500 gone – or $6,000 a year.
Cut that in half, and you’ve got enough for a badass vacation or like two-thousand Tinder boosts if that’s your thing.
The 4th category: Recurring subscriptions and random shit you never use. Do you really need Netflix AND Disney+ AND Hulu?…
Action: Look at your recurring expenses and remove anything you haven’t used in the past 30 days. You can:
- Cancel
- Downgrade
- Ask for a refund
- Ask for a discount
Step 3: Maximize your income
If you don’t have any money to save you won’t get very far. That’s why saving on its own fall short.
While increasing income requires more effort than cutting expenses for most people, it’s still crucial.
Some people say “Just focus on making more money and you won’t need to budget.” Well… It depends.
If you have good money habits, sure. If you have bad habits, it won’t matter. Plenty of high-income people go broke because they can’t control their spending.
Two actions take immediately
- Reach out to your boss and ask for a raise: Most people think they deserve a raise, yet they never ask. Change that today. Spend the next 10 minutes writing an email to your boss, telling them you should have a conversation about your compensation.
- Declutter your home and sell stuff: Just like your subscriptions, you probably have a bunch of things at home that you haven’t used for years. It’s time to put them in a pile on the floor, take pictures of them and sell them.
The temptation of hedonism…
As you progress in your career, you naturally start earning more. The golden rule here is to maintain your current lifestyle.
If you secure a $1,000 monthly raise, resist the urge to upgrade your entire home and wardrobe.
You will feel “better” for 2 weeks and then return to the same baseline. Your mind adapts quickly and you’ll feel the same.
Don’t jump on the hedonistic treadmill.
It’s much better to live comfortably, below your means than having a bunch of shit you don’t need anyway.
You can still do smaller or meaningful improvements in your lifestyle. For example, using 10% of the raise while saving and investing the rest.
“But Paw, what if my current situation sucks?”
Fair point. If your apartment is so noisy you can’t sleep and it’s messing with your work, then yeah – spend the extra money on a better place.
There is a clear return on that investment: less noise => more productivity => more money (hopefully)
That brings us to…
Step 4: Invest in stuff
Here’s something wild: Save half your paycheck, and you can retire in 17 years.
Not “retire” like sitting on your ass watching Netflix all day, but “retire” like doing whatever the hell you want because you don’t need anyone’s money.
There are two main channels you should invest in:
- Yourself (courses, coaching, skills)
- Assets that make you money (stocks, real estate, commodities, etc.)
Investing in yourself is probably the best thing you can do. Your biggest asset is yourself. If you upgrade your skills in whatever area, you will be able to make even more money in the future.
Not that the end goal of everything is to have more money.
50% savings rate = “retirement” in 17 years
Here’s how it works: Put aside 50% of what you make, invest it with a modest 5% return, and in 17 years you’ll have enough passive income to cover all your expenses. Forever.
Plus a fat stack of cash on top.
Example: You bring home $4,000 monthly after tax and live on $2,000. Keep that up for 17 years, and boom – you’re set. No need to grind until you’re 65 like everyone else.
Want to get really crazy? Save 75% of your income and you can hit this in just 8.5 years. Mr. Money Mustache has a good article on this.
Compound interest is pretty incredible.
Actions
- Open a brokerage account if you don’t have one already
- Set up an automatic payment into broad-based ETFs
A few notes before you go all-in
Hold up though – before you start throwing money at investments, get your shit together first:
- Emergency Fund: Build a cushion covering 2-6 months of expenses. This is your “life happens” money. Two months minimum, six if you’re paranoid.
- Don’t Be Stupid: Got a big purchase coming up? Keep that money in cash. Investing money you need soon is like gambling with rent money.
- Debt Comes First: Pay off debt first. A 13% interest rate on debt is like getting a guaranteed 13% return when you pay it off. That’s better than most investments.
BUT – not all debt is created equal. Taking out a loan to start a business that makes you money? That could be smart debt. Maxing out your credit card for a new PlayStation? That’s bad and keeps you poor.
There are many paths to financial freedom
The path I have outlined today is just one of many paths and this one won’t make you rich fast.
What it will do is teach you GOOD money habits. They will serve you no matter which income level you are at.
I personally believe that money increases happiness to an extent. All the people I have met say that they are happier with money than without it.
That includes myself too.
Before I had “enough” money I would be stressed about it. After making more, saving and fixing my poor money-habits, I feel much better.
The cool thing is that once you get into these habits, they run on autopilot. Just like hitting the gym or eating right, managing money becomes second nature.
You won’t even think about it anymore – it’ll just be how you operate.
Financial freedom isn’t about deprivation – it’s about making conscious choices that align with your long-term goals. Start small, be consistent, and watch your wealth grow over time.