8 Simple Steps to Financial Independence
This post is 1,506 words and a 7-minute read.
I have no idea how to start this post, so I will get right to it. Here are the 8 Simple Steps that I am taking to ensure I achieve Financial Independence as soon as I can.
1. Start Early
"The best time to plant a tree was 20 years ago. The second best time is today." - Old Chinese Proverb
I started my finance journey by mistake.
I happened to overhear a friend's girlfriend talking about Roth IRAs and investing. I was still at my childhood church when my pastor pushed for everyone to take Financial Peace University. Those lucky (well I like to say Grace-filled) moments totally changed my life, not immediately but those were the starting points for everything to change for me.
We do not know what we do not know. The only way we can understand what is best for us is to learn. It is to seek out knowledge. Reading this blog is part of that learning. Congratulations on taking this step. However, learning is not enough. Knowledge is implementing the information you learn. So take action.
2. Gain a Skillset
"If a man will not work, he shall not eat." - 2 Thessalonians 3:10
You have to make money in some way. To do that you need to have skills that people need and are willing to pay for. These skills can be gained formally (college) or informally (self-taught or apprenticeship).
I always wanted to be an engineer, this requires formal training but not all types of engineering require formal training. So I went to college and became an engineer. Your path might be different from the norm but figure that path out.
3. Increase Income
"A feast is made for laughter, wine makes life merry, and money is the answer for everything." - Ecclesiastes 10:9
Using the skills you have acquired make money. Then continue learning and growing your set of skills. This will make you more marketable and valuable. Which means you can demand more for your time and work.
I am still figuring this one out. Although I earn more now than I did 6 years ago when I began this journey, there is still plenty of room for growth.
The more money you earn the easier life becomes. But remember more money in itself is not the goal
4. Spend Less Than You Make
Robert Kiyosaki author of Rich Dad, Poor Dad said "It is not about how much you make but how much you keep." Now I do not agree with a lot of what Kiyosaki says or stands for; However, I learned that truth is truth regardless of the source.
As you make more money, you will be drawn to all kinds of things in life. Your job is to do everything you can to never allow the hamster wheel that is American life takes you over. Do not try to keep up with the Joneses.
A man making $50,000 a year but spending $40,000 is richer than a man making $1 million a year but spending $1.2 million.
"You can do ANYTHING but not EVERYTHING" - Greg McKeown
The more money I make, the more opportunities present themselves. There will always be more clothes to buy, more restaurants to go to, bigger homes to upgrade to, better cars to buy, better vacations to go, and so on and so forth. As Warren Buffet said, "The difference between successful people and really successful people is that really successful people say no to almost everything."
Lifestyle Inflation will creep up and surprise you. Do everything to avoid it. You can live a very comfortable life without living the way you see everyone else choosing to live, remember you only see the exterior. You do not get the fine print of anyone's life but your own.
P.S: Ignore Societal Expectations. Set your own RULES for your life.
5. Save, JUST SAVE
Saving is like putting on Kevlar before going out to a warzone. Sure, a shot might never be fired at you but do you really want to take that risk?
The biggest risks in life, you will never see coming. No one saw the pandemic coming, yet we all had to deal with it. As Morgan Housel says, "Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment."
Savings is how you get to take back control of your time, it gives you options and flexibility. The ability to pounce when an opportunity presents itself. I believe Morgan Housel puts it best, "Every bit of savings is like taking a point in the future that would have been owned by someone else and giving it back to yourself."
6. Avoid Consumer Debt
“I learned this very early, it is very hard to go bankrupt if you don't have any debt.” - Peter Lynch
This is the number 1 way, we can be guaranteed to never reach Financial Independence. Every debt you take on is a ball and chain on you. It is a tax on all your future time, effort, and money.
We use debt for things that are beneficial such as mortgages or student loans. But we do it with our eyes wide open, understanding the cost of the decision. As much as you can, avoid carrying debts on consumable items such as cars, boats, phones, laptops, food, vacations, etc. Especially avoid carrying Credit Card Debts. If you cannot afford something, just wait until you can afford it.
Debt may seem like a short cut but it never is. It is the number one way we outspend our income.
"The rich rule over the poor, and the borrower is a slave to the lender." - Proverbs 22:7
7. Invest Wisely
"All portfolio problems stem from investor’s inability to stick with a boring old asset allocation.” - Ben Carlson
Good investing is excruciatingly boring. It will never be bragged about on Twitter or Instagram or TikTok. No one will look to you as a genius. You will never be the guy with the amazing story at parties. It will always be something you share with just your family and celebrate inwardly. In our social media, posting everything in society is insanely boring. However, it is insanely effective.
Good investing is actively avoiding the seemingly "sexy" investment options such as SPACs, NFTs, S**t Coins, Penny Stocks, Meme Stocks, etc.
Good investing is buying low-cost index funds within tax-advantaged accounts such as Roth IRA, 401(k), 403(b), 457, and HSA. It is automating a portion of your income to be invested every single time you get paid and only paying attention enough to do a bit of rebalancing on an annual basis.
It is not exciting but it will make you WEALTHY. The problem is Real Wealth is Boring and takes time
8. Patience
This is the hardest part of gaining Financial Independence. You can be doing all the right things but it takes so much time to see the results of your effort. Every single item on the list has a requirement to be patient:
Patience to learn a new skill and then patience for the chance to implement those skills
Patience to find employment or business opportunities to gain more income
Patience to save more money rather than using debt to buy everything you want
Patience to follow the plan you put into action when you are paying off debt
Patience to Invest and allow compounding to do its thing without you interrupting it
As long as you are doing everything you know you ought to be doing at the level you ought to be doing it, you will reach the goal of Financial Independence. But it will take time, which my microsecond brain does not like most times.
Every item on this list is "SIMPLE" but definitely not EASY! They all have emotional aspects that will challenge us and require more from us than we think. But if we can do these things, I can guarantee that you will achieve Financial Independence. It just might look a bit different than what you imagine it to be.
Recommended Reads
Morgan Housel explains Why we have the desire to pursue everything we can't have and the detriment of constantly pursuing the next "must have" thing.
David Johnson from Humble Dollar asked the necessary question "What is Retirement?". For those of us who aim to be Financially Independent and potentially Retire before the typical age of 65, this is a necessary read to know what we are walking into.
Jack Raines explains When Diversification Dies. A discussion on the current overload for more options for option’s sake. A dangerous game we play with ourselves.
Hillary Hoffower breaks down how making $100,000 is no longer enough to live a super comfortable life in the US.
My answer to this is to determine for ourselves what is enough for ourselves and our families to be happy. Otherwise, we will forever be on a hamster wheel chasing the next and the next