The 5 Pillars of Financial Independence and Sustainable Living
Last Updated: April 16, 2020
Welcome to Saving Our Green! We're glad you're here.
Our story begins like many others in personal finance… We found the financial independence community in 2016, and from then on, financial independence was our goal.
We wanted to live freely without hoping our next paycheck would cover our expenses for that month. So we started saving as much as we could.
It wasn’t until we started reducing our consumption when we realized how much we actually consumed before we found Financial Independence. Then early in 2019, sustainability had really begun to become something we wanted to pursue as a lifestyle.
As we started incorporating sustainable living, we found that it was a perfect match for financial independence. It was the yin to the yang. The Pippin to Jordan. The Jay-Z to Beyonce… we could go on, but you get it.
So, we decided to start a blog about it. We’ve compiled all of our thoughts on the topic and came up with this guide as an overview.
We call it the Pillars of Financial Independence and Sustainable Living, of which there are 5 (for now). These are the topics that we will write about extensively on this blog.
This guide only begins to scratch the surface, so consider it a starting point or a reference. For each Pillar, we outline the concepts that have and will continue to be instrumental in our financial independence and sustainable living journey, and we hope they will serve you in the same way.
We hope everyone will benefit from this guide and feel armed with the knowledge to integrate these pillars into their lives. However, we know that everyone’s situation is different, and some Pillars may be harder to implement than others. And that’s okay! We encourage you to cherry-pick; use the things that work for your circumstance.
Table of Contents
Simplify your life with minimalism
Minimalism can help you focus on what is truly essential in your life. It is a means of finding freedom by reducing the clutter in your life. See our beginner’s guide to a minimalist lifestyle to get started.
We purged our belongings when we moved to a much smaller home. After the purging, our reaction was one of immense relief. Merely getting rid of all the excess was incredibly freeing. It felt like a huge weight was lifted off our shoulders.
Live in a house that fits your lifestyle
Stop reading right now and think for a second. How many of the rooms in your home have you spent at least 10 minutes using over the last week? Chances are it’s the kitchen, living or family room, and bedroom.
According to US Census data, in 1978, the average home size for new single-family homes was 1,750 square feet. In 2018 it rose to 2,602 square feet!
That’s almost a 50% increase in home size over 30 years. Based on this fact, it’s a good indication that statistically, we have much more space than we actually use.
The first step to living a life with less means having less “stuff” in your life. *Queue Marie Kondo* You’re likely living with things you don’t need or even forgot you had. Decluttering can be an incredibly powerful tool for reducing stress, supercharging finances, and saving the planet.
We’ve found that we were much more motivated to keep our space clean and prevent the accumulation after we decluttered.
Only buy things that add value to your life
Now that we live “minimally,” we don’t want to bring in more clutter. We ask ourselves what value each purchase will bring into our lives. This doesn’t have to be revolutionary, but there has to be an answer. A good one.
Becoming a conscious consumer
We’ve all been there. Sitting on our couch casually perusing Amazon. One-click and four hours later, it’s on our doorstep. They’ve made it so easy for us to throw our money at them!
Money has power. How you spend yours can have staggering impacts. A conscious consumer is a person who considers the social, economic, and environmental impact of a purchase.
Reduce, reuse, recycle whenever possible
Before buying something, consider the entire lifecycle of that product, cradle-to-cradle. Do you need it? Will it end up in the Great Pacific Garbage Patch or Puente Hills when you’re done with it? Is it easily repairable? Is it made of easily recyclable materials?
Reducing waste is still the best possible action you can take. You discourage the creation of more products, save money, and save the environment.
Buy socially responsible, high-quality products
According to the 2018 Conscious Consumer Index, 44% of Americans think that socially responsible products are too expensive, and 40% don’t even know where to purchase them.
As a society, we tend to think that cheaper is always a better option for our finances, and this is simply not true. Having the mindset that an item is cheap makes it seem easily replaceable. Lower quality products usually have a shorter lifespan, so we end up buying more to replace them as they become worn, which increases waste. This cost adds up over time, to the detriment of both your wallet and the environment.
Grow your own food, or buy from local farms
The main takeaway here is to decrease the number of miles between you and your food source. We made this change in our lives, expecting to pay much more in groceries. However, to our surprise, on average, we only spent $50 more per month on food as opposed to shopping at Trader Joe’s.
Supporting locally-owned businesses and farms is essential to the wellbeing of our communities and can be beneficial to your wallet.
Eat a plant-based diet
A study was done that shows eating a plant-based diet has approximately 4X the effect in CO2 reductions compared to recycling. The fact remains that if we are going to reduce the impacts of climate change, humans need to eat less meat.
We made the switch to 95% veggies, and we couldn’t be happier. We feel less sluggish and are saving money doing it!
Track your savings and expenses
Knowing what you’re spending is the first step towards making changes that can dramatically impact your savings. For starters, we recommend using a tracking app like Personal Capital.
As Mr. Money Mustache points out in his famous article, saving has two main benefits:
- Saving money increases the amount of money you can invest
- Saving money decreases the amount of money you need to live
Resist lifestyle creep
The higher up the income ladder you climb, the harder it is to resist falling victim to lifestyle creep. It’s the secret killer people working towards financial independence. What’s important to realize is that each new purchase you make will delay your ultimate goal of reaching Financial Independence.
For instance, if you can save as little as $100/year on shopping alone, that will become $9,000 in 30 years if invested in a low-cost index fund! The key is to establish good buying habits, which is also a key component in sustainable living.
Minimize your fixed expenses
To make an impact on your savings, you need to focus on the big-ticket items. Most of the time, these are your fixed expenses.
Fixed expenses are those that are constant, recurring, or cannot be changed easily, such as rent, car payments, cell phone bills, internet, etc. Reducing these is key to improving your savings rate.
These can be minimized by moving into a house that fits your lifestyle, refinancing your home, ditching that cable subscription, or getting rid of your car payment.
Pay off debt strategically
The two biggest debt offenders for most people are credit card debt and student loans.
We had $90,000 worth of student loans and paid them off in five years. We refinanced and consolidated our loans and reduced the interest to a low manageable rate.
As for credit cards, don’t let yourself fall into the trap of consumer debt. Only charge what you can pay off in full every month.
Optimize your taxes
To get started with tax optimization, leverage the power of your tax-advantaged accounts: Roth IRA/Traditional IRA, 401k (or equivalent depending on your industry), and HSA.
Investing in these funds has some profound benefits for financial independence:
- First, it reduces your overall taxable income, potentially even putting you into a lower tax bracket.
- Second, the funds grow tax-free!
Sustainable investing is becoming mainstream
Earlier in 2020, the CEO of the world’s largest asset management company, Larry Fink of Blackrock, released his annual letter to the world’s CEOs addressing the impacts on the generation of long term growth. He stated that the most significant risk to future economic growth is climate change and that the best way forward is through sustainable investing.
When the CEO of the world’s largest asset management fund makes this the center of their investment strategy, people start to pay attention.
Start investing today
Investing can be a foreign topic for many people. In fact, as of 2017, only 54% of Americans own stock. To make matters worse, the top 10% of wealthiest Americans own 84% of that stock.
More than 54% of Americans should own stock. Maybe it’s because they don’t know how to invest, or perhaps they think they don’t have enough money to do it.
The good news is that investing has become easier than ever today, and some platforms like Betterment don’t have a minimum amount needed to fund, and they take all of the decision making out of it.
If you can save $5 per week and put that into an index fund, you would have almost $19,500 in 30 years. You would have contributed around $7,200 while making $12,300 in interest!
Low-cost index fund investing
In the Financial Independence world, broadly based low-cost index fund investing is central to the idea of building wealth on an average salary. These are the funds that have the best returns while charging you the least amount of money for using their services.
However, what we’ve found (and this is true with most of the finance world), there is little to no thought about the impact that our investments are having on climate change.
Socially responsible investing (SRI)
Do a quick audit of your investments to see what you’re invested in! If you’ve never considered sustainable investing before, there’s a good chance you’re unwittingly encouraging damaging behavior with your money.
Sustainable investing is becoming more mainstream, and there are more options than ever for us to make a positive impact on the sustainability of the world through our investments.
Change your travel habits
When we talk about travel, we’re not just talking about getting on a plane for your next vacation or business trip. We’re talking ALL travel, including (but not limited to): your daily commute to work, going to get groceries, visiting friends in the suburbs, going back home to see your parents, international trips… the list is endless.
With a few changes to your travel habits, you can have some significant impacts.
Optimize your daily commute
The best thing you can do is to live as close as possible to work. This might be obvious, but it’s really the best way to save money, the environment, and the only resource we can’t get back… time.
Stuart’s commute to work in the suburbs of Virginia cost him about $334 per month. When we moved to Seattle, our rent increased by $200, but both of our commute costs were eliminated.
That nets him around $134 per month in savings! Put into an index fund every month, in 30 years at 6% interest, that could become $135,000 towards retirement.
Minimize your impact when flying
Avoiding flight travel is consistently recommended as one of the most impactful things you can do to reduce greenhouse gas emissions.
We aren’t about flight shaming here, as most of the responsibility to switch to renewable fuels should be on the airplane industry. Most experts agree that it will be one of the last industries to switch over to renewables, so while we wait, let’s do what we can to reduce our impact.
Some things you can do: book nonstop flights to and from major hubs, pack light, and buy carbon offsets.
Practice sustainable tourism
Tourism is one of the fastest-growing sectors in the global economy. In 2018, people spent a total of 2.8 trillion USD, a number which continues to grow at about 5% per year. When done with care and respect, your travel can have a real positive impact on society.
To reduce your impact, educate yourself on the Leave No Trace principles, and buy local products and services that support the native community.
We’d be remiss if we didn’t mention travel hacking, as it’s the best way to save money on your travels.
Most importantly, if you’re in consumer debt or don’t pay off your credit cards in full every month, then travel hacking may not be for you.
If you’re brand new to travel hacking, we highly recommend reading up on this beginner’s guide over at The Points Guy. You can also take the Travel Miles 101 course from Brad Barrett, who is one of the hosts over at the ChooseFI podcast. It’s a great step-by-step course on the mechanics of travel hacking.
That about wraps up the Pillars. We’ll keep adding more strategies and dive deeper into the ones we’ve laid out on this post, so stay tuned for updates.
We don’t want this to be a place where its “if you don’t make these changes, then the world will die, and you’re the worst person ever.” No, we want it to be a place where everyone can share ideas and strategies that help people in their everyday lives while minimizing impacts on the environment.
We wanted to do what we could in our lives with things that we can control, and pass along all the information we’ve found helpful and actionable while still being able to maintain or improve our lifestyle. Hopefully, this website will hold us accountable along the way as well!
If you’ve enjoyed the guide, let us know! If not, feel free to leave some constructive criticism! Just be a nice person about it.
What do you want to hear more about? Are there any strategies you want to share? What strategies have you used for financial independence or sustainable living?
Reach out to us and let us know!