A couple of years after graduating from the University of Chicago with a degree in philosophy, Grant Sabatier was in a position many people his age face: unemployed and broke with about $10,000 of student loan debt and $20,000 of credit card debt.
After realizing he had only $2.26 in his bank account, the 24-year-old knew he needed to make a change. And he needed to do it fast.
“My parents said I could live at home rent-free for three months to get my act together,” Grant tells Student Loan Hero. This arrangement included free meals (whatever was in the fridge), but he paid for his cellphone bill.
“They were disappointed in me. I was disappointed in me,” says Grant. “It was a huge wake-up call.”
Five years and three months later, he was a millionaire.
To reach his $1 million savings goal, Sabatier started with an aggressive 60-day overhaul.
“I knew I had to do something radically different,” he says. “So I did an assessment of my skills by seeing what I was good at like writing, taught myself Google AdWords by watching YouTube videos because I knew it was a tangible skill that was marketable now, read every financial book possible, got a job as digital marketing manager running Google Adwords campaigns at a digital marketing agency [and] making $50,000 a year, and started saving 50 percent of my income.”
While the new gig and mindset helped, the determined amateur financier knew he needed to do more to achieve total financial freedom.
“I took what I learned at my job and started aggressively side hustling,” Grant says. “When I made more, I didn’t spend more. I invested almost all of it. That’s what helped me reach my goal.”
Grant admits he “pushed all the variables to the limit,” giving up his social life and dedicating all his time to making and investing more money. But his tactics are applicable to everyone.
“Personal finance is actually simple,” he says. “You just need the blueprint or road map to make your money work for you.”
Now, the 32-year-old dishes out firsthand advice on his popular blog, Millennial Money. Here are his top five tips for reaching that $1 million goal.
1. Get a side hustle
Even if you’ve secured a solid salary, that doesn’t mean it should be your only source of income if you want to become a millionaire.
“Figure out your skills and start side hustling,” says Grant. “Once I learned how much my company was charging other companies for [its] services, I started finding clients on my own. I started by making a website and digital marketing campaign for a small law firm in Chicago. Four months later, I used that same template for a larger law firm for $100,000.”
While this approach worked for Grant, be sure you haven’t signed a noncompete agreement that prevents you from engaging in competition with your employer.
But just because the entrepreneur was growing his side digital marketing business didn’t mean he wasn’t also taking on small gigs.
“It’s never been above me to make an extra $20, $40 or $60,” says Grant. “My neighbor needed a cat-sitter for the weekend for $60. I did it, took the cash, deposited it, and invested it the next day. The future value of that $60 would be $400 in 10 years. I would pick up gigs like that all the time. There are infinite ways of making money.”
Flipping mopeds and VW vans and starting an online English course were other side hustles the eager 20-something tried out during that five-year period. The key, according to Grant, is not only to make more but also to save more.
“Only side hustle if you’re going to invest it,” he says. “It’s essential to get as much money as possible to work for you as soon as possible. That’s what the side hustle is all about.”
2. Invest first and pay off student debt second
Like many people his age, Grant was facing a mountain of debt. But instead of focusing on paying it off, the money hoarder focused on making money now to get rid of debt later.
“A lot of people feel like they have to pay off their loans before investing,” says Grant. “I realized I could get more money investing it instead because the interest on the student loan was 5.00% but my net return on my investments over the last five years was 13 percent. Get over that emotional hurdle that you’re in debt and start investing. I’d rather have my money growing and pay of the low-interest debt later.”
Grant admits it’s important to prioritize debt and that you should pay off high-interest credit cards first, but he says student loan debt can wait.
Before you take that advice, keep in mind one important thing: interest rates.
If your student loan debt has a higher interest rate than your expected return on investment, you should pay off your student loan debt first. If your loan interest rate is 5.00% and you expect to earn 7 to 8 percent on your investments, then it’s worth considering investing your money first.
Check out Student Loan Hero’s payoff versus invest calculator to help you crunch those decision-making numbers.
3. Increase the amount of money you’re saving
One of Grant’s biggest changes was focusing on a savings goal rather than an income goal.
“I figured out I needed to save $165,000 a year,” he says. “So I started increasing the percentage of my income that I would save. If you increase the percentage of your income you save every 30 to 90 days by 1 percent, you don’t even feel it, but by the end of the year, you’re saving up to 10 to 12 percent. For every 1 percent you’re saving, you can retire up to two years earlier.”
Realistically, you need to be saving 25 to 50 percent, according to Grant, but this rule of thumb is a great place to start.
“Just think: If you’re making a $50,000 salary and saving 70 percent of it, you could retire in 15 to 20 years,” he says. “When you add side hustling in, you can fast-track it. It all comes back to how much you can invest to reach that financial goal.”
4. Invest in index funds
Grant credits the finance book “The Coffeehouse Investor” by Bill Schultheis for changing the way he looked at the stock market.
“A lot of people make the mistake of investing in individual stocks,” Grant says. “I would never put more than 10 percent of my net worth into individual equity.”
Instead, the self-taught money manager invested 80 percent into index funds because he knew he could get an annual return of 7 to 10 percent over the next 10 years.
“Investing in index funds is like investing in the entire stock market,” he says. “Then, choose companies you know will have value to invest that remaining 10 percent.”
5. Live frugally
Although Grant was a millionaire in his early 30s, he didn’t run off and buy a fancy sports car or a mansion.
“I always maintained a tight budget and kept my spending in check,” he says. “I’ll admit [that] last year, I spent $200,000 and had a really nice wedding in La Jolla, California, but I quickly determined that would not be economically sustainable. I caution people to maintain their lifestyle while getting raises.”
Grant could make about $50,000 to $60,000 per year off his investments and never work again, but he continues to work and diversify his incomes to expand his wealth.
He also takes his expenditures into consideration. He spends about $400 per year on clothes and bought an apartment a couple of steps down from what he could afford.
“Staying frugal is key in all of this,” he says. “Remember — it’s all about saving, not spending.”
“In the end, my philosophy is built on four principles: Make more money, reduce your expenses, maximize the total percentage of your income you are saving, and then put all of the money you save into investments so it can grow,” says Grant. “Then, you’ll be closer to becoming a millionaire.”
Want to get started investing?Here are the top investing options for 2018!
|0.5%||$0||Visit Future Advisor|
|0.15% – 0.35%||$0||Visit Betterment|
|0.49% – 0.89%||$25,000||Visit Personal Capital|