Dedicating fifty to seventy percent of your income to savings is an excessive in discipline. Seeing those savings grow to the point where financial independence is achieved can take a decade or more. Getting to that point is not a race to the finish, but a daily routine that manages cost and diverts those savings into sustainable long term investments.

Budget

To understand what you can save, you first need to understand what you spend. If the goal is to save fifty percent or more of income an honest review of current spending habits is the first step toward getting those expenses under control.

Begin this process by monitoring every dollar spent in a month. Limiting this review to a few weeks may miss monthly expenses such as utilities or cellular payments.  

Most overspending tends to fall into three categories, major purchases, entertainment, and eating out.

• Major purchases: These are the tech, clothing, and one-off purchases which are nice, but not explicitly necessary.
• Entertainment: Movie tickets, drinks, live music, and the like are an acceptable occasional splurge. Consider this a treat as opposed to an entitlement.
• Eating out: Track the number of dinners, lunches and coffees purchased. For a person new to FIRE, dining expenses offer fertile ground for cost savings.

Tracking and cutting expenses does not mean eliminating the pleasures of life. I drink a ton of coffee. Before I committed to the FIRE lifestyle I would buy 1-2 cups of Starbucks coffee a day. I never purchased anything fancy, just a regular old black coffee.

Where I live in Beijing, a small black coffee costs two dollars and eighty five cents. That seems reasonable. But what does that look like over time? 

Starbucks	Cost/cup	Cups/day	Cost/ day	Cost/week	Cost/ month	Cost/ year
Black coffee	$2.85	2	$5.7	$28.5	$114	$1368

Fourteen hundred dollars a year is real money and that really adds up over time.

Coffee remains a part of my life, but today I buy the beans and brew it from home. A bag of beans costs $5.64 and brews 24 cups. When you throw in a coffee pot, grinder, and travel mugs, that ends up costing about a a fourth as much as purchasing a Starbucks. If you apply the same logic to eating out or going to the bar, savings compound quickly. 

When I engaged in this budget exercise I was surprised by how much I spent. I felt guilt. That guilt made me pause when new expenses came up in the future. Over time, I realized the feeling of watching savings grow gave me significantly more satisfaction than the purchase that I would have previously made. This is borne out in the research. Temporary satisfaction of a new purchase fades quickly. Saving money produces a durable satisfaction

Tracking expenses over the long term takes discipline, so it is important to make doing so as easy as possible. Paying with cash and tracking those payments manually takes time and effort. A better way to track expenses is to keep nearly all costs on a credit card for a month. This provides a detailed purchase record.

The great news is there are multiple free tools available to help track spending and develop a targeted budget. Mint is a great mobile and desktop application that links directly to users accounts. I personally like to take it a step further with Personal Capital, another free application that offers a holistic view of investments and liabilities.  

Develop a routine

A thoughtful budget will get expenses under control and unlock new avenues to maximize savings. But achieving financial independence takes time. The trick is to consolidate budget discipline into a sustainable lifestyle through routine. 

Where you previous bought coffee every day before work, now you’re brewing a big pot at home. To make this a sustainable habit, brewing coffee needs to be convenient. That means having a coffee pot, a regular supply of coffee beans, a grinder, clean travel mugs, washing liquid to wash the mugs. It means getting up five minutes earlier to make the coffee. 

The same applies to eating out. If your normal routine includes purchasing lunch and dinner. To maximize your savings you instead need to buy groceries, prep meals on the evening and weekends, and build time into the process. 

Performing a new behavior for 66 days creates habit. This applies to everything from committing to a new exercise routine to saving more for retirement. 

Once a budget is clear and routine is set, expenses will decrease.

Limit Temptation

Discipline is easiest when temptation is removed. Out of site, out of mind. If the goal is financial independence, you need to limit opportunities to make big purchases. Deliberately limiting temptation will mean you do not need heroic self control to stick to your routine.

This is broadly applicable. In a study on snacking, researchers reorganized a kitchen in a Google office so that one beverage station was located closer to a snack bar than the other. Results were revealing. Employees who visited the beverage station closer to the snacks were 69% more likely to grab a snack than those who used the beverage station located farther away. The consequence is simple, the closer temptation is, the likelier a person will indulge.

The same is applicable to financial independence. Minimizing purchase opportunities will decrease money spent.

Build a circle of relations who are similarly frugal, disciplined, and investment oriented to increase success. It is hard to cook at home when all of your friends insist on eating out every night. It is similarly difficult to save sustainably when the money saved is going out the door by a less frugal spouse. This financial compatibility is critical to financial independence.

Spend time wisely

Time is finite. To maximize effective use of time, the trick is splitting time into different categories and understanding the relative benefit for each activity. Benefit does not always equate to money, 

• Critical tasks: These are the first priority obligations that offer a significant return on investment. Meals with your family might fall into this category. Your salaried day job certainly does. 
• Priority Tasks: These are the tasks that could be put off, but still create significant if less immediate value. Exercise is a good example.
• Negligible Tasks: These are the taks that offer little in the way of tabgible value. In other words, if you stopped tomorrow it would have little to no impact. Watching television, playing video games would fall into this category.

Only the individual can take stock of how he spends time. The trick to financial independence is understanding how much time is falling into the third category and having the discipline to refocus your energy on something that creates more value, like a side hustle. 

Instead of watching TV, you can spend that time consulting for an expert network. Instead of playing a video game you can spend that time developing a skill that can be leveraged for extra income. Because of your frugal lifestyle, these incremental increases in income go to savings as opposed to new spending. 

Visualize the future but act short term

Imagining a future of financial independence is wonderful. Getting to that point takes time, sacrifice, and effort. It also requires acting in the short term. 

Putting away fifty percent or more of income requires daily action to cut costs. Weekly action is needed to review spending and finding optimizations. Monthly action is needed to save that additional income. Yearly action is needed to make big investments like new real estate. 

Discipline is the glue that allows you to be motivated by that new lifestyle on the horizon while making the tough short medium and long term actions that make the future possible. huge results over long periods of time.