Financial Freedom – Book Review

Financial Freedom

The Financial Freedom book relates the story of Grant Sabatier going from nothing to Financial Freedom in about five years. Financial Freedom is nothing else than what most people call Financial Independence. It is the state at which you can decide what to with your life without needing to work. It is important to note that Grant did not retire. Grant is still working. But he reached financial independence with more than one million accumulated in about five years.

This book relates his story, and all he learned during his five years journey to Financial Freedom. As soon as he decided on his goal, he did everything he could to make the journey as fast as possible.

The story begins with Grant in 2010. He had to move back home with his parents. He was just laid off from his work. At this point, his net worth was 2.26 dollars. He was very depressed. It was not the future he envisioned. Considering his options, he realized that he did not want to work all his life for a poor retirement around 70. Doing exactly what other people were telling him to do would not help him.

He had to find his own way. That is when he set himself the goal to save one million dollars and to retire as soon as possible. Five years late, he had a net worth of over one million. This book is the story and learnings of these five years.

Actionable plan

One excellent thing about this book is that it contains some very actionable advice. Actionable advice is what is missing from several other Books. The book is based upon a nice seven-step plan for getting to Financial Independence.

The steps are rather easy. You define your FI number and where you are now. Then you must focus on the things that will improve your journey the most. Interestingly, Grant advises not to budget. This opinion is contrary to most people in the personal finance community. But I would agree with him on that one. Instead of focusing on saving one dollar on your monthly milk bill, you could try to get an extra 50 dollars a month. Extra income makes a more significant difference and is often easier. Finally, you need to invest any extra money you can get during your journey.

Throughout the book, Grant will detail each of the seven steps, and he will help you toward reaching your FI number. For instance, there is an entire chapter about computing your FI number. Your FI Number is the amount of net worth you need to become financially free. And contrary to popular belief, this number is not set in stone. You should revisit this number at least once a year.

A fixed savings rate is not enough!

You should not set yourself the goal of saving 10% of your money each month for the rest of your life. For one thing, 10% is too easy. And much more important, you should always try to increase that target. Grant advise you to increase your savings by 1% each month for the first year! This is very strong advice. It will make you reconsider all your expenses.

While you should not only focus on reducing your expenses, you should still reduce it to a minimum if it brings you closer to your FI number. For instance, a single recurring expense can have a massive impact on your FI number. If you spend 50 dollars each month on a subscription, this is 600 dollars per year. With a withdrawal rate of 4%, this is 15’000 dollars that this single expense is adding to your FI number. This expense may be worth it. But once you realize how much it will cost in your long run, you may not want to delay your financial independence that much.

An excellent way to increase your income (and, therefore, your savings rate) is to increase your primary career income. For this, there are many ways. Grant is giving many pieces of advice: how to get a promotion and how to get ahead in your job with networking and developing new skills.

Side hustle for extra income

While Grant recommends you to live a frugal life, he is saying that it is more efficient to focus on increasing your income rather than decrease your expenses. And once again, I agree with him.

While I focus mostly on my career, Grant did many side hustles during his five-year journey to reach FI faster. There are many examples in the book of possible side hustles for everybody. Grant built some websites, for instance. He also flipped some domain names and vintage mopeds. And he even watched the neighbor’s cat and he babysitted to get some extra money. An entire chapter is devoted to the optimization of your side hustles.

Investing is an accelerator

Getting some extra money and getting your primary income is excellent. But this is not enough! If you want to become financially free as fast as possible, you need to invest. Investing is the accelerator you need to use to pick up speed on your way to financial freedom. Grant invested all the extra money he got from his side hustles and his improved career income.

Now, there are a few things you should take care of before you start investing. If you have high-interest debt, you should pay it off before. For low-interest debts, it will depend on you. If you have a low-interest mortgage, you may not need to delay investing while you get rid of that debt. You need to consider the Expected Rate of Return (ERR) on your investments and the interest rate of your debts. In any case, you should always invest in employer-matched accounts such as your 401(K).

The book contains an entire chapter on the details of investing. It covers topics from savings accounts to stock investing. You will understand target allocation and be able to choose your own. You will also understand that you should minimize fees as much as possible. There is nothing new in this chapter. But it is a very good condensed version of everything you can find on personal finance blogs around the internet. It is well written and very accessible.

Something is interesting about Grant’s advice on investing in international equities. He advises investing only five percent of the portfolio in international equities. Now, we need to remember that it is for the U.S. where U.S. stocks are half of the world stocks anyway. I still feel it is too low. But most of the time, there is some sort of correlation between U.S. Stocks and world stocks.

And over the last years, the U.S. stocks have fared better than international stocks. But the past is not a good indicator of the future for stock market performance. That is why I think a bit of diversification is important. I would still go for a 20% international allocation.

Real Estate

Grant is a big advocate of Real Estate investing. While I agree that real estate has some advantages, I do not think it is a great one.

Grant advises you to put down as little money as possible. He is quoting a 3% down payment in most examples. I think this is too little. Leverage is indeed the main reason to invest in real estate. You can use money from the bank to invest with low interest. This form of leverage will bring more returns in the end. However, leverage is not without risk!

The chapter about real estate has many interesting pieces of advice about how and when to buy houses to make the highest returns. It even covers getting people to invest you to maximize your profits. If you are interested in real estate, this chapter is really interesting.

However, the big problem with this chapter is that it is challenging to reproduce. In most countries, there is no way you are going to get a mortgage with such a little down payment.

Build a routine

Grant advises you to build a routine for managing your money. Having a personal finance routine is something I completely agree with. I have already talked about my monthly routine before. But Grant takes it to the next level and builds a daily routine of five minutes to manage his finances.

Another thing that Grant and I agree on is automation. Grant says that automation is a good way to become complacent. Here is one quote I liked:

It’s easy to automate, to coast in life. But coasting won’t get you to the next level. …
Financial Freedom is not built on complacency. It’s built on pushing your boundaries as often as you can.

I could not agree more with this! I already talked about why I believe that automating your personal finances is often a mistake. If you are serious about managing your money yourself, you will get better results than being complacent about it and using the famous set it and forget it plan!

It is all about time!

By retiring at 70, you will give your most valuable years to your employer. You do not want to waste your time. You want to do the things you love for most of your time. But for this, you need to be financially free.

It is better to start very early. It is never too late, but starting early will give you many advantages. You should plan your entire journey to Financial Freedom and try to get there as fast as possible.

Do not forget to live

Once you are focused on one of your goals, it can be easy to completely forget about the rest of your life. You need to be aware that this can be detrimental to your life.

Grant admitted that he worked too much during these five years. He cut on his sleep and tried to generate income all the time. Later, he realized that more rest could have made him more efficient. You should never neglect your sleep. You are more productive when you are more rested. As soon as you feel burned out, you need to take it down a notch. Do not get sick trying to become financially free!

One thing you should not do is to cut too many things you enjoy because you want to reach FI faster. For instance, you may like your weekly manicure, and it may make you feel good. Then continue doing it! If you give up everything you enjoy, you are not going to have a happy journey to Financial Independence. There is no real need to cut that morning coffee either! You need to find the right balance.

Things I did not like

Overall, there are a few things I did not like about this book. Mostly, it is challenging to reproduce what Grant did.

The main thing I do not like is that the book is way too optimistic. Grant started his investing almost at the best possible time. He started almost at the beginning of the longest bull market in stock market history. That means his returns were incredibly high. And he did not have to suffer a main stock market crash.

So while his plan worked really well for him, it would not have worked if he started four years earlier or five years later. At least, he said that he started at a very profitable time. There is a small paragraph about this fact in the book. But this should be much emphasized in the entire book.

If he started investing in the middle of a bull market and had to suffer a bear market, he would have needed a few more years than five years to achieve his financial freedom. I am not saying that what Grant did was not exceptional! He was just aided a lot by the state of the market. And I believe that the book makes the stock market looks much better than it is!

The other thing I did not really like is the Real Estate chapter. Once again, it is too optimistic. Most of the examples are based on a very low downpayment, like 3%. But for most people, it is impossible to find such a low down payment. In Switzerland, you have to pay 20% of the amount in cash. Secondly, the computations of the Return On Investment (ROI) of Real Estate are not correct.

The author is computing it without taking interest payments into account, making it much bigger than it is. And he is also not accounting for buying and selling fees. I agree that leverage will make an investment return bigger. But not as big as Grant writes.

Finally, it is very centered on a United States perspective. This is the case for almost all Personal Finance Books. But from such a big book, I would have expected more in terms of globalization of some information. For instance, how much you should have in international stocks highly depends on the country you are living in.

If you live in a tiny country, you should probably not have more than 70% of your stocks in Swiss stocks. It is simply too small. You should have something like 20%. It is the kind of general advice I would have expected from the book.

Conclusion

There are many more things in this book that I did not cover. But I do not want to spoil it for you!

Overall, I think it is a good book. It contains a lot of actionable advice and a full plan that you can follow if you want to reach Financial Independence (FI) as fast as possible. It is a very accessible book. Everything is broken down into logical pieces, and it follows a nice plan.

Moreover, the book contains a lot of examples other than Grant’s. There are many good examples and also a few bad examples. Finally, there are also many facts in the book. These facts make the book very strong!

Also, it is a great and motivating example to see that can be done if you are serious about investing and saving. But keep in mind that this is an extreme example at a very lucky time. In practice, you cannot expect everyone to be able to retire in 5 years.

I agree with most of Grant’s opinions. For instance, you should probably focus more on building your income rather than decreasing your expenses. And you should not rely solely on automation. You should manage your finances! But you should not go crazy on real estate or have so little international allocation.

If you are interested in buying Financial Freedom, you can obtain it on Amazon. If you want to read more about Books, you can take a look at the best personal finance books I have read.

Did you read Financial Freedom? What did you think of it? Are you thinking of acquiring it?

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