I get asked quite often:
“How do I save money and live sustainably at the same time?”
Good news! It’s really quite simple. If you’re new to financial freedom and a sustainable lifestyle, there’s only one thing you should focus on, to begin with:
In today’s post, I’ll let you in on how and why reduction is so powerful.
The Power of Reduction to Reach Financial Freedom
I’m going to cut right to the chase.
To illustrate why you should focus on reduction, here are some facts.
FACT #1: One in 10 workers making over $100,000/year are living paycheck to paycheck. Further, on average, only 47% of all Americans have an emergency fund that would cover their expenses for 3 months.
The average savings rate across America in January of 2020 was 7.7%.
How does a person making over 100k per year save only 7.7% of their salary?!
Two words. Lifestyle Inflation.
You make more money, so you convince yourself that you can afford to spend more. You end up buying a better car, a bigger house, and more things.
You get used to this lifestyle and forget what it feels like to live on a smaller income, and eventually convince yourself that you can’t live without your new things.
Check out how big of an impact that lifestyle inflation has on the number of years until your retirement.
On a 100k income at a 7.7% savings rate, you won’t be able to retire for 300 years!
If this is you, don’t worry.
If your goal is to reach financial freedom, then the typical rule of thumb is that you need to save and invest 25X your annual spending. This will allow you to live off of your portfolio indefinitely (at a 3-4% withdrawal rate).
$20,000 in spending will allow you to achieve financial freedom in 6 years, which is why the reduction of lifestyle inflation is critical.
Reduce the amount of lifestyle inflation you allow into your life. Reduce your money commitments. Reduce the stress of living paycheck to paycheck. Live a sustainable lifestyle.
FACT #2: If everyone on the Earth lived like Americans, we would need 5 Earths to sustain life.
As a people, Americans use a ridiculous amount of resources. I don’t think that’s going to change anytime soon without drastic action by governmental leadership.
So since policy decisions are mostly out of control of everyday Americans, we need to find ways to use our resources more efficiently to live a more sustainable lifestyle.
It’s good that we aren’t without a lack of actions we can take, and of course, the biggest thing we can do is do so… you guessed it, reduce!
Based on a study, the top 3 things that you can reduce that have the most significant impact are:
- Take fewer flights
- Live car-free
- Have one fewer child
Now, hear me out for a second.
I’m not saying having kids is a bad choice, only that it has the most substantial impact on greenhouse gas emissions, especially if you live in America (since Americans tend to use the most resources).
I’m strictly speaking of the data. But obviously, it’s not a data-driven decision. You should do what aligns with your values and your goals.
All of these attributes to a sustainable lifestyle and can easily tie back to your finances and, eventually, financial freedom.
Reduction is key.
FACT #3: 69% of Americans say they spend too much money eating out at restaurants, among other things.
This is definitely one of my weaknesses. While I love cooking, a good pizza from our local pizzeria is hard to resist.
Are you guilty of going out to eat with friends with soon-to-be-expired food sitting in your fridge?
On top of that, my average monthly restaurant spending is $367, which is $67 over my budget. I need to reign it in and figure out how to reduce my budget altogether.
Take a look at the graphic below.
The one that you should really pay attention to is the “Uneaten or Expired Food” category that people are seemingly not willing to reduce.
Food waste is a real problem (see my next fact). Plan on getting the right amount of food, so nothing is wasted.
Reduce your food waste. Reduce your spending on eating out and uneaten food.
FACT #4: Of all the food produced, about 40% is wasted. Further, North America wastes 20% of all meat produced.
If we were able to cut waste in half, we would be able to add 20% to the world’s food supply.
Just start by eating what you buy. Don’t let good food go to waste. Eventually, maybe you’ll decide you’re buying too much, and at that point, you can scale back.
Take it a step further and start planning your meals out for the week. This can put a pretty big dent in your grocery spending. Figure out a few staple batch meals that you can rotate out each week.
As an example, there are two main batch meals we have. Louisiana style red beans and rice, and burritos. Both are very cheap, easy to make, vegetarian, last a long time in the fridge, and are delicious.
As I also mentioned above, reducing your meat intake can dramatically reduce your personal ecological footprint. Meat production is one of the leading contributors to greenhouse gas emissions.
Try to reduce the amount of meat you eat. Eat one less meal containing meat for dinner this week. Even eating meat only once per week can have a significant impact.
FACT #5: The United States produces 100.2 Quads of energy and wastes more than two-thirds of it.
Energy is complicated. We get it from many different places, and it changes every year based on political and economic tides.
One thing is for sure, though, America produces a LOT of energy. But we also lose a LOT of it. The second law of thermodynamics is to blame for some of that, as no energy system is perfectly efficient.
The biggest takeaway here is the transportation industry, which consumes and wastes the most energy we produce. Most of that comes in the form of oil.
Find ways to reduce your transportation impact. Can you get rid of your car?
Walk more, bike more, reduce your fossil fuel usage.
FACT #6: 55% of Americans regularly experience stress throughout the day, one of the world’s highest rates. Stress is known to have negative health impacts.
Don’t let stress get the best of you.
Focus on the present and enjoy the moment. Reduce your news consumption, reduce your commitments, and reduce your expectations.
These simple actions can have a significant impact on your mental health, physical health, and financial health. Just do less, and focus on what truly matters to you.
Reduce the unessential in your life.
If you’re not familiar with it, check our guide to minimalism for a step-by-step process to living a minimalist lifestyle. Minimalism ties in very nicely with a sustainiable lifestyle.
Using Reduction for a Sustainable Lifestyle
Financial freedom through a sustainable lifestyle can be attainable through the power of reduction.
Reduce your spending and save money.
Reduce lifestyle inflation.
Reduce your waste.
Reduce your meat consumption.
Reduce your energy consumption.
Reduce your commitments.
Reduce your expectations.
Reduce the unessential in your life.
Practicing reduction in your life can supercharge your finances, have a positive impact on the environment, and improve your mental and physical health.
What’s one thing you’re going to try and reduce today? What’s one tip that you have to reach financial freedom and live a sustainable lifestyle? We want to know!