Financial instability is perhaps the biggest challenge for young adults, and some take drastic measures to overcome it. A wealth expert recently went viral by saying you can achieve financial freedom by stripping—but, as she's explained to Newsweek, it's definitely not what you think it is.
As entrepreneur Sarah Adekola, know on Instagram as millennialwealthsarah, explains in her viral clip shared earlier in February, stripping is a comprehensive approach to personal finance that encompasses saving, managing your total debt, planning for retirement, investing, and optimizing your income.
Adekola told Newsweek that she initially came across this method back in 2022, and it has been a "game-changer" for her.
"It has provided a structured framework to organize my financial planning, allowing me to focus on saving, managing debt, planning for retirement, investing, and optimizing my income in a more systematic way.
"By following this approach, I've been able to enhance my financial discipline, make more informed decisions, and set clear goals for my financial future. It's not just about managing money more efficiently; it's also about adopting a mindset that supports sustainable financial health and growth."
So, what exactly does STRIP mean? According to Adekola: "S is for savings, T is for clearing your total debt, R is for retirement, I is for investment, and P is is for plan."
She explained that the STRIP method is designed to cover critical aspects of personal finance, and while it can be flexible based on individual circumstances, there's a logical order that she considers to effectively implement this approach.
"Establish an emergency fund first. This is your financial safety net to cover unexpected expenses without the need to incur debt," she said.
Although establishing the percentage of funds to allocate to each component of this method involves a personalized approach, a common recommendation, according to Adekola, is to aim for an emergency fund that covers at least 3-6 months of living expenses for use in an emergency.
She continued: "Once you have a safety net, focus on managing and reducing your total debt. High-interest debts, like credit card debts, should be prioritized to reduce the amount of interest paid over time."
Her suggestion is aiming to allocate enough to cover minimum payments on all debts, and then use any remaining disposable income to target the highest interest debts aggressively.
According to Business Insider the average debt in America so far in 2024 is about $103,358 across mortgages, auto loans, student loans, and credit cards, and it peaks among consumers who have a good credit score, usually between those aged 40 and 49.
"With debt under control, you can start planning for retirement," she said. "This involves setting aside money in retirement accounts and taking advantage of any employer match programs, if available.
"Once you regularly contribute to your retirement, you can look into investing outside of retirement accounts to grow your wealth. Diversification across different asset classes is key to managing risk."
After you've established your emergency fund, managed your debt, and are contributing to your retirement, you can allocate remaining funds to other investments.
"This percentage will vary greatly depending on your financial goals, risk tolerance, and time horizon. It's important to research and possibly consult with a financial advisor to create a diversified portfolio that aligns with your objectives."
Last, but not least, is optimizing income. "Throughout this process, continuously look for ways to optimize your income," she said: "This could mean seeking higher-paying jobs, developing new skills, or finding passive income sources."
The video quickly went viral on social media, getting viewers from across Instagram.
One user, dextar458, commented: "Wooo. For a moment there, I was worried..." And dexmontgomery20 said: "You a genius."
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Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Maria Azzurra Volpe is a Newsweek Lifestyle Reporter based in London. Her focus is reporting on lifestyle and trends-related stories, ... Read more
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