Graham Stephan leads by example. A self-made millionaire by 26, he has learned to save almost all of his income. His financial independence gives him the freedom he values more than any possessions.
“It’s so much more than just being frugal and saving money,” he says in a YouTube video. “It’s really about prioritizing your life around the things and experiences that mean the most to you and then cutting back on everything else.”
In that video, Stephan details the most essential steps to save money. No matter your income level, there’s something in it for you.
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House Hacking
Housing is most people’s biggest expense. According to the Urban Institute, the average American spends 30% of their income on housing.
Stephan controls this expense through “house hacking” — buying a property with two or more units and renting out all but one. Ideally, the rental income from the other units would cover the cost of ownership.
If you have a single family, you may be able to accomplish the same thing by renting out a finished basement or accessory dwelling unit (ADU), a type of on-site rental unit you might know as an “in-law apartment” or “granny flat.”
The main prerequisite for this strategy is the down payment, which trends around 8% for first-time buyers and 19% for repeat buyers. Stephan made his first down payment back with a cash-out refinance, then used his rental income to cover the refinanced mortgage payment.
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Rental Hacking
For people who can’t afford a down payment, Stephan recommends “rent hacking.” It works like house hacking, except that you rent a multibedroom unit and sublet the other rooms to cover your rental costs.
For those who can’t afford a full unit, Stephan recommends living with roommates to save money. Those savings would go into a down payment fund so you can “house hack” or “apartment hack” sooner.
Car Hacking
Car hacking is about losing as little to depreciation as possible. Kelley Blue Book estimates that cars lose up to 60% of their value in the first five years, and depreciation slows after the car hits 100,000 miles.
Stephan recommends buying a car around that “sweet spot,” ideally below market value. He’s used this technique twice, selling the car a few years later for the price he initially paid.
Travel Rewards
Stephan doesn’t only live and drive for “free” — he also travels for nothing out of pocket.
His technique is simple: sign up for a travel rewards card, meet the minimum spending requirements to get the bonus and then redeem the bonus for free travel. Then, repeat the process with a new card.
There are a few caveats, Stephan says. It’s important to spend only as much money as you’d spend anyway, even if you’re trying to meet the minimum charge. Also, paying the card off in full every month is essential.
“It’s really important never to pay a single dime in interest,” he warned.
Finally, Stephan advises against using this method if you plan to apply for a mortgage or other loan in the near future. Opening a new credit card can damage your credit score, and it takes time for that score to recover.
Everyday Frugality
Eating and making coffee at home is popular advice for good reason.
If you save $15 a week making coffee at home, that totals $780 annually. By Stephan’s calculations, if you invest that money in a Roth individual retirement account with a 7% return, you’d have around $178,000 after 40 years.
He applies the same logic to dining. He eats at home whenever possible and orders cheaply when he goes out. He tells viewers to order appetizers instead of entrees and skip the drinks during social events.
Exceptions for special occasions are OK, he said. “I value the experience much more than if I ordered a $12 drink every time I went out.”
He also believes in reducing the cost of going out by finding free parking. You can avoid overpaying for garage parking if you don’t mind walking farther. This hack is a bigger deal in cities where parking costs hundreds a month.
Track Your Spending
Stephan admitted that little changes won’t make you a millionaire, but a mindset shift can make a big difference. He encourages people to think about spending as earning.
When Stephan avoids buying a $5 cup of coffee, he thinks about the $5 he now has to save or invest. He believes this kind of reframing rewires your brain and how you think about saving, so it’s more enjoyable not to spend money
He ended his video by challenging viewers to track their spending for two months and then look at how much they spend.
“You’ll be shocked at how much money you waste on things that bring no value to you,” he predicted. “By tracking your spending and knowing exactly where it goes, you’re going to be able to better pinpoint the inefficiencies, cut back and save money for the things that do matter.”
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This article originally appeared on GOBankingRates.com: Graham Stephan: How To Save 99% of Your Income
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