The first $25,000 is the hardest, according to Scott trench in his book Set for Life: Dominate Life, Money, and the American Dream. Today I’ll be discussing some of the topics he outlines and how I use these principles to pursue financial freedom. Consider this a free guideline and summary!

If you want to follow along, you can use the following link to purchase a copy yourself: Set For Life

So lets get started!

1. The Road to $25,000.
   It all starts with a goal. A dream, an aspiration. Scott Trench puts it well when he talks about needing to save your first $25,000 as the critical first step towards financial freedom. Why save $25,000? To prove to yourself that you can. One of the problems that a lot of people have when it comes to finance is the fact that they think they’re unable to take any financial risks whatsoever. And with that, they’re unable to take advantage of opportunities because they don’t have any cushions or safety nets in place.

   What makes for a good safety net? Having $25,000 saved up in a savings account. But if you’ve never had a safety net, $25,000 may seem daunting – especially considering the average American only has ~$1,000 saved up for a rainy day. Don’t worry though, it’s as easy as starting with throwing $5 dollars in a savings account on the first of the month… Now I can hear the comments rolling in ‘Michael, $5 dollars is not the same as $25,000’ and you would be right, dear reader, if I was only telling you to save $5 and stop there. But I’m not saying stop with $5. What I’m encouraging is the behavior of saving money for yourself first. If you survived putting $5 dollars away for yourself, ramp it up to $10 dollars next month. Still around? Put away $25 the next month, and keep increasing how much you save month over month. Make it a challenge for yourself and see how much you can get away with saving!

   In my personal experience, I hit my first $25,000 in savings when I lived in Hawaii, back in 2016 (7 years ago at the time of writing this). That was after being enlisted in the US Air Force for 3 years (earning an average of ~$30,000 a year, with benefits included). The main contributor to my ability to save $25,000 was reading this book (Set For Life), setting a goal, and chasing that goal. Overall, I was only saving about 20-25% of my income year over year (which may sound like a lot but I also didn’t have many bills and I made the conscious choice to live with a roommate once I moved off base into a friend’s apartment). All this to say, I believe you can save $25,000 if you haven’t already.

2. The Road to $100,000.
Okay, continuing the theme of safety nets and financial literacy – we have to get to $100,000 of savings and/or investments.

Why? Besides proving to yourself that you can, saving $100,000 affords you the opportunity to take real risks. I’m talking ‘quit your job’ type risks. **I’m not actually saying quit your job, as there is nuance to everyone’s situation that I can’t account for in this blog post**.

When I saved my first $100,000… I didn’t quit my job/separate from the US Air Force. But it provided me with a cushion or the financial runway to consider alternatives. Hate your job, but can’t afford to pay your bills without your job? THAT is why you NEED to save and invest and shoot for $100,000. So in the case that you want to hit the escape button, you can. You can likely live off of that financial runway, that $100,000.00, for at least one to three years (depending on your expenses). How’s that sound- the opportunity to not work and chase other goals and creative opportunities because we have saved enough cash to pay for our living expenses. Pretty cool huh?

3. The Final Road – the Road to Financial Freedom ($100k+)
Still here I see – after conquering our first goal of $25,000, setting a goal of $100,00 and crushing that too – we’re at the ‘end’. That end being – striving for financial independence. Instead of setting a goal of $1,000,000 (One Million dollars), we shoot for something more valuable – replacing our yearly income with less-active income. We don’t strictly need a million bucks – we just need to calculate how much money we need to live comfortably on.

Start with our living expenses – how much does it cost to support your current lifestyle? Lets make a brief example – let’s say I need $20,000 to live off of (assuming that $20,000 covers my rent, food, water and transportation – again, this is a hypothetical situation, your mileage may vary). Now we can apply the inverse of the 4% safe withdrawal rate rule to our cost of living (4% rule: in retirement, you can withdraw 4% of your initial retirement portfolio balance annually, adjusted for inflation, and have a high probability that your savings will last for a 30-year period). The inverse of 4% is a 25x multiplier. So, if I multiply $20,000 of living expenses by the inverse 4% (25x): 20,000 x 25 = $500,000. Meaning, in this situation, I would only theoretically need to save and invest $500,000 in order to replace my cost of living of $20,000. Isn’t that crazy? That practically covers the majority of Scott’s book (Set For Life).

In Summary:

• 1. Save $25,000
• 2. Save and Invest $100,000
• 3. $100,000+ , build Financial Runway to replace your current income
• 4… Profit

Thank you for reading! And I’ll catch you in the next one. If you want to keep up with me, subscribe to my newsletter and you’ll be notified every time I post. Insert your email below!

-Michael, from military.cash

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