What does it take to retire decades earlier than most people? Is it possible to build enough passive income to cover your lifestyle without working a regular job?
In Set for Life, Scott Trench presents a three-step blueprint for achieving early financial freedom. His approach focuses on aggressive savings, strategic income growth, and smart investing—designed primarily for young professionals ready to take an unconventional path.
Continue reading for our comprehensive Set for Life book overview.
Set for Life Book Overview
Retirement often seems like the distant finish line of a long career, but what if you could retire decades earlier than most people? Set for Life, a book by Scott Trench, argues that you can achieve financial freedom at a young age—with enough passive income to cover your lifestyle expenses without needing to work a regular job. He argues that by following a three-step approach of living frugally, increasing your income, and investing wisely, you can gain the freedom to pursue your passions, travel, or spend more time with family without financial constraints.
The strategies in Set for Life are tailored for single, middle-income earners in their 20s and 30s who have minimal savings and are willing to take an aggressive and less conventional approach to achieving financial freedom as quickly as possible. However, if you’re in a different stage of life, you can still find valuable tips for optimizing your lifestyle, reducing expenses, and building wealth.
Trench is a real estate investor and broker, and he’s the CEO of BiggerPockets, a real estate investing platform and community. He bought his first real estate in his early 20s and achieved financial independence before the age of 30. Trench is also a cohost of the BiggerPockets Money Podcast, where he shares insights on personal finance and investing.
In this overview, we’ll first discuss how to build savings through low-cost living by cutting major expenses. Next, we’ll look at Trench’s strategies for increasing your income, including making smart housing choices and pursuing higher-paying job opportunities. Finally, we’ll explore ways to invest your accumulated wealth to generate passive income.
Three Steps to Early Financial Freedom
Trench writes that most Americans follow the typical path of working a long career and saving only a fraction of their income—a path that requires you to sacrifice the best years of your life and retire late in life with modest savings you hope will last. However, Trench has an alternative three-step approach to achieving financial freedom much earlier:
- Step 1: Cut expenses through low-cost living.
- Step 2: Grow your wealth through higher-paying opportunities.
- Step 3: Invest your accumulated savings in assets to generate passive income.
Key Metrics to Track
Before detailing Trench’s approach, let’s discuss three key metrics to track to help you improve and speed up your progress toward financial freedom: your net worth, spending, and income.
Net worth: Net worth is the total value of what you own minus what you owe. To calculate your net worth, subtract your total debts from your total assets—which are things you own like your investments, rental properties, and businesses. Trench recommends you only include assets that generate income or reliably appreciate (increase in value over time). Things like home equity, cars, and retirement accounts that don’t directly generate usable wealth shouldn’t count toward your net worth.
Spending: Trench suggests you track how you spend your money with software that automatically records and categorizes every expense. There are two types of expenses: fixed expenses (like rent, insurance, and loan payments) that stay the same each month, and variable expenses (like groceries, entertainment, and shopping) that change month to month. Review your spending monthly to spot areas of waste. The goal is to paint a clear picture of your lifestyle cost so you know how much passive income you’ll need to sustain it.
Income: Your income is the money you receive regularly from various sources. Record it to see your financial progress and get a clear picture of your money situation. Trench suggests you break it down between active income (like jobs and side hustles) and passive income (like investments and rental properties).
Trench explains that, when your assets generate more income than what you spend each month, with a healthy buffer, you’ve reached financial freedom.
Now that you understand how to track these three metrics and monitor your financial situation, you can begin taking concrete steps toward financial freedom.
Step 1: Cut Expenses Through Low-Cost Living
To get started on the path to financial freedom, Trench recommends you first focus on cutting expenses through smart, frugal living. Aim to save over half of your paycheck and live on less than $2,000 a month. The less you spend early on, the less wealth you need to accumulate later, and the faster you can reach financial freedom.
Trench argues that it’s better to focus first on saving rather than earning for two reasons. First, you can cut expenses right away, whereas earning more money takes more time and extra commitment. Second, the money you save by cutting expenses isn’t taxed, whereas the money you earn gets taxed, so it’s more efficient to save money than to earn extra taxable income.
Trench recommends three habit and mindset changes that can help you reduce your spending.
1. Do it yourself. Become self-reliant by learning to handle basic tasks yourself instead of hiring professionals, like simple home and car repairs. Research problems first and hire specialists only when truly needed.
2. Settle for good enough. Consider whether premium options provide enough extra value to justify their higher prices. The difference between the best option and a good option is often minimal—for instance, store brand grocery products often taste very similar to name brand items but at a fraction of the cost.
3. Make smart purchases that reduce your monthly expenses. Smart purchases are items or investments that may cost more upfront but save you money over time. For example, buying a reusable water bottle and filling it up from the tap instead of buying disposable bottled water can significantly cut your expenses and is less destructive to the environment.
Focus on Your Biggest Expenses
When it comes to reducing your spending, Trench suggests focusing on four of the largest expense categories: housing, transportation, food, and insurance. He writes that relatively small budget items like entertainment and clothing aren’t worth stressing over, assuming you’re reasonably frugal.
Trench provides several tips to cut down your largest expenses:
Housing: Rent an affordable apartment close to your workplace and split costs with roommates. While the trendiest neighborhood might be alluring, choosing a more affordable area just a few miles away can cut your rent in half.
Transportation: Daily car commutes can be expensive, considering gas costs, car repairs, and the countless hours spent in traffic. By living close enough to walk or bike to work, you can save more than $10,000 annually, according to Trench. However, if driving is necessary, opt for a second-hand, fuel-efficient car instead of a new one.
Food: Make your meals at home using budget-friendly groceries, rather than ordering food or dining out frequently. Keeping healthy food readily available can help you avoid convenient, costly takeout orders. However, Trench writes that you can still enjoy an occasional meal out with friends.
Insurance: For life insurance, Trench recommends term life insurance, which is cheaper than whole life insurance because it only provides coverage for a set time period. This is because once you achieve financial freedom, you’ll have sufficient assets and net worth to self-insure and provide for your family, so you’ll no longer need life insurance coverage.
For health, auto, and other types of insurance, choose high-deductible plans to keep premiums low. As you accumulate savings, you’ll be able to cover those higher deductibles if needed. Trench writes that in the long run, the money saved on premiums would outweigh an occasional hefty bill. He adds that combining high-deductible health plans with health savings accounts (HSAs) can also provide tax benefits that save you money.
Manage Your Savings Wisely
Once you’ve saved some money by cutting expenses, Trench advises that you use your savings in three ways:
1. Create an emergency fund. Set aside $1,000 to $2,000 for unexpected costs. This safety cash allows you to handle sudden bills, like a car repair, and avoid taking on new debt.
2. Clear your debts. Your approach to clearing your debts would vary depending on the kind of debt you have: Bad debts are those that have high interest rates, incur late fees, or hurt your credit score. Pay those off immediately after you set up a small emergency fund. Good debts are those with low interest rates like mortgages, student loans, and car loans, and you can pay these off more slowly. For good debts, choose to either clear small debts first for psychological wins or target the highest-interest debts first for maximum efficiency.
3. Set aside a year’s worth of savings. Trench encourages you to save $10,000 to $25,000 in easily accessible wealth. You can keep this money in a bank account or invest it through after-tax brokerage accounts in stocks, bonds, and funds. While investing offers potential higher returns, you’ll need to decide if you’re comfortable with the risk versus keeping it safely in cash. Regardless, having a year’s worth of savings gives you the flexibility to pursue new opportunities without fear of running out of money. You could, for example, switch careers or start a business knowing you have a year’s cushion of savings to fall back on.
Step 2: Boost Your Income
With a solid financial foundation in place from cutting expenses and building savings, the next step is to increase your income. We’ll discuss how you can use the financial cushion your savings provide to do two things: Buy a house and live rent-free through “house hacking,” and pursue new opportunities to increase your earnings.
Live Rent-Free by House Hacking
Trench writes that you can transform housing from an expense into a source of income through house hacking: Instead of renting an apartment or buying a single family home to live in yourself, you buy a small multiunit property like a duplex. You’d then live in one of the units and rent out the other units.
According to Trench, your tenants’ rent should cover most, if not all, of your mortgage payment and other housing costs, allowing you to essentially live for free. With time, your property appreciates in value and you gradually build equity as you pay down your mortgage. Trench argues that, in the long run, house hacking can boost your wealth far more substantially compared to traditional rental or homeownership.
How to Buy a Property to House Hack
Trench shares four key factors you should consider to secure a good house hack property.
1. Affordability: You should be able to afford the property with a standard mortgage while still having a few thousand dollars or more set aside for repairs, maintenance issues, and other problems that may arise.
2. Livability: The property should be a place you can happily call home. Consider work commutes, public transport or cycling routes, and the overall feel of the neighborhood. If your desired area is too expensive, Trench suggests exploring nearby neighborhoods that cater to your needs but are more affordable.
3. Cash flow: Trench recommends you analyze how money flows in a potential house hack. First, figure out how much money you’ll make with you living there, factoring in your living expenses and rental income from other units. Then, calculate how much money the property would make if it were entirely rented out, without you living there. A true house hack should make you more money than it costs in both scenarios. This ensures that the property remains financially viable even if your circumstances change and you need to move out.
4. Appreciation potential: Consider a property that needs some work, as you may be able to acquire it at a lower price and then boost its value through strategic upgrades. At the same time, Trench advises paying attention to neighborhood trends, such as new developments, improving infrastructure, or shifting demographics that could drive up property values over time—for instance, a new public transportation line or a growing job market.
Increase Your Income
Beyond house hacking to eliminate housing expenses, Trench recommends pursuing new opportunities to boost your earnings. He points out that the average American spends the majority of their day working or commuting. So, to really grow your earnings, focus on making more money during your workday instead of trying to build wealth in your free time.
Find a Performance-Based Job
To significantly increase your income, Trench suggests you find a job that rewards performance rather than pays a fixed salary. He argues that traditional salaried jobs often limit your earning potential with small pay raises and predetermined career paths. On the other hand, performance-based jobs offer limitless earning opportunities that directly correlate with your hard work and results. These jobs include sales representatives, freelance consultants, and commission-based financial advisers—to name a few.
To get a performance-based job, you may need to make significant changes. You might switch to a different department within your current company, such as moving into sales, or transition to a new industry. Trench notes that these opportunities often have some initial trade-offs, like a lower base salary or reduced benefits. However, he argues that the potential for higher earnings outweighs these initial sacrifices.
Whether you decide to stick with a traditional salaried job or pursue a performance-based role, Trench offers some advice for landing a higher-earning job:
1. Learn in-demand skills. Pick up a skill that commands a high salary in the marketplace, like coding or a skilled trade like an electrician or plumber. These skills can often be acquired through short-term training programs rather than expensive four-year degrees. Apart from formal training, build your expertise through self-directed learning to stay relevant—Trench advises reading a book on business or self-improvement every week. Podcasts, online courses, and insightful blogs are also good learning aids.
2. Surround yourself with high achievers. Put yourself in environments with people and resources that can help you reach your goals. Being around ambitious, successful people will push you to perform at a higher level and expose you to more opportunities.
Start a Business or Side Hustle
Trench writes that starting a business or a side hustle is another way to increase your income. If you’re interested in starting a business but have minimal funds, consider starting a service-based business, as these often require little upfront investment.
Trench suggests you focus on side projects and pursuits that build on your main job skills and experience, as you can grow them more easily into larger, more profitable ventures without needing to put in a lot more time or resources. For example, if you’re an accountant, setting up a freelance bookkeeping service using your existing knowledge would be simpler and potentially more profitable than starting an unrelated business.
Step 3: Put Your Money to Work
Trench writes that, once you’ve earned at least $100,000 by cutting expenses and finding higher-paying work, you’re ready for the final step to financial freedom: investing your money wisely. Your goal is to invest your savings to earn enough passive income to take care of all your living costs. We’ll cover Trench’s tips for making smart investments, including how to maximize investment returns, use your time and effort efficiently, manage risk, and invest in index funds and real estate.
Boost Your Investment Profits
To get the most out of your investments over time, Trench suggests never spending the original amount of money you put into an investment. You should think of invested dollars as permanently dedicated to working for you and only spend the profit they bring. For example, if you invest $20,000 and it grows to $21,000, you can use the $1,000 gain, but leave the original $20,000 alone. This helps your investments keep growing and producing income indefinitely.
Trench advises against spending all of your investment profits, however. He suggests you spend only 25 to 30% and reinvest the rest to allow your wealth to compound faster. Out of a $1,000 return on a $20,000 investment, you can reinvest $800 to get greater returns in the future.
Use Your Time and Effort Wisely
Trench suggests you be thoughtful about how you use your time and effort when investing because working harder doesn’t always equal higher investment returns. He contends that putting more effort into an investment will yield better results only if you have control over the investment. For instance, spending a lot of time choosing individual stocks is often wasted effort because you have no control over the company’s performance.
Instead, Trench suggests you focus your efforts on investments you actively manage—like rental properties or small businesses. He notes that often, having more knowledge about your investment is more important than the amount of effort you put into it. For example, a restaurant owner who studies local food trends and customer preferences will likely make better business decisions than one who works long hours but never researches their competition or changing consumer tastes. The knowledgeable owner might introduce popular menu items that boost profits, while the uninformed owner might struggle despite their dedication.
Trench also advises that you focus on the absolute dollar return an investment produces (the actual money the investment earns) instead of the percentage return (the profit expressed as a percentage of the initial investment). Focusing on a higher percentage of return can be a waste of time. For example, spending dozens of hours researching stocks to earn a 15% return makes little sense if you only have $1,000 to invest, since the $150 profit is meager for the effort.
To safeguard your time and effort while investing, Trench suggests you think about the opportunity cost, which is what you lose when you choose to invest your resources in one thing instead of another. Aim to get at least a 10% return on your investments each year—lower returns might mean you’re missing out on better opportunities.
Manage Risk
When you start investing, Trench advises you not to worry too much about diversification (spreading your money across different assets). If you have less than a few hundred thousand dollars to invest, focusing on one high-performing asset class, such as stocks or real estate, can help you accumulate wealth more quickly. Diversification only becomes more important as your wealth grows and preserving it becomes a higher priority.
Additionally, Trench argues that contrary to popular belief, stocks aren’t riskier than bonds. While the prices of stocks may change more compared to bonds in the short term, stocks are actually less risky than bonds for long-term investors because they’ve historically provided higher returns over extended periods than bonds.
However, Trench warns that you should avoid speculation, which means buying assets solely in the hopes that their price will go up. He explains that speculative activities like buying gold or cryptocurrency aren’t true investments because they don’t create real value or sustainable long-term wealth in the same way that investing in productive assets like businesses or real estate can.
Invest in Index Funds
Trench writes that when investing in the stock market, you shouldn’t pick individual stocks. He writes that stock picking isn’t worth your time for two reasons: First, you’re competing against full-time professionals who have vast resources and manage huge sums of money, so it’s highly unlikely you’ll outperform them by picking stocks in your free time. Second, unless you have a large amount of money to invest, the potential additional returns don’t justify the time and energy spent. Countless hours of research might only result in a minor hourly profit, which isn’t a smart way to spend your time.
Trench says that instead of stock picking, you should invest in index funds. Index funds work by buying shares in every company within a particular market index, like the S&P 500. By investing in an index fund, you spread your investment across many different companies, reducing the risk of losing your entire investment if one company fails. These funds also have low fees compared to actively managed funds (where professional fund managers make decisions about which stocks to buy and sell) and typically outperform actively managed funds in the long run. Trench says it’s harder to identify a fund manager who will consistently beat the market than it is to pick winning stocks yourself.
Invest in Real Estate
In addition to investing in index funds, Trench recommends investing in rental properties. Investing in rental properties helps you build wealth in several ways at once: First, you earn money each month from tenants paying rent. At the same time, your property may increase in value, especially if you buy in an up-and-coming area or make improvements to the property. Lastly, each time you make a mortgage payment using the rent money, you own a little more of the property, so you build equity in the property over time.
Rental properties also give you more control compared to other investments like stocks. As a landlord, you can proactively find creative ways to cut costs, respond quickly to issues, and make improvements that boost your property’s value. Trench points out that many landlords are inexperienced, so if you treat your rentals like a serious business, you can outperform other landlords.
Trench says that real estate investing also allows you to use leverage, which is a technique of borrowing money to buy more valuable properties. For example, imagine you’ve saved up $50,000 to invest in real estate. Instead of buying a $50,000 property outright, you use it as a down payment on a $300,000 house, with the bank lending you the remaining $250,000. This way, you get to control a larger asset with less of your own money. Then, if the house’s value increases by 5% in a year, it’s now worth $315,000. Subtracting the $250,000 loan, your equity is now $65,000. You turned your $50,000 investment into $65,000—a bigger gain than if you’d bought a $50,000 property that increased to only $52,500.
Trench writes that eventually you can sell properties that have appreciated and use the proceeds to purchase larger, potentially more profitable properties. This allows you to continually grow your portfolio and increase your returns.
