The Nine Pillars of Financial Independence
Pursuing financial freedom requires you to live differently than most people. You’ll find life hacks, unconventional adventures, and make short-term sacrifices that most people would never even think about.
I want to provide a framework within which we’ll be working — a list of methods that can help you reach financial independence. Here are the nine base components:
Cut extra spending. People don’t need a lot to be happy. Once you’ve got food, housing, and healthcare, you’re free! You don’t need to buy anything else. You have feet to take you places! You have hands to make things with! You have loved ones to cherish. Freedom awaits
Eradicate debt. Because of compounding interest, debt is the financial equivalent of a house fire inside your bank account. Don’t buy anything unnecessary until your debt is paid off. See also: News Flash: Your Debt is an Emergency!!
Accept free money. Most of us have a lot of free money staring us in the face and don’t appreciate it. (#guilty)
- Some employers offer 401k matches, which is the same as offering FREE MONEY. Say your employer offers a 4% match — you could try to get a 4% raise at work… or you could just spend 5 minutes reading up on how to maximize your employer’s contribution to your account.
- Use your employer’s pre-tax payroll deductions. This is money that is put elsewhere before your paycheck’s taxes are calculated, thus lowering the amount of income you pay taxes on. 😉 Last year I saved $500 on transportation by simply opting into NYC’s pre-tax metro card (3-minute online form). Some employers also offer other pre-tax options for childcare, healthcare, and insurance.
- Lots of cities have great programs for residents. My hometown offers gym memberships at the rec center for $20 / YEAR. Some communities offer free classes and discounted entry to museums and national parks.
- Use credit card perks. Banks try to lure people in with these perks and then get customers into debt. As a financially responsible person, you can take advantage of these credit card incentives without going into debt.
- Further reading: The Wall Street Journal on how to take advantage of free money
Generate income as needed. I went the career switch route to raise my income, but side hustles can be just as lucrative. Once you start paying attention, you’ll see money-generating opportunities all over the place.
Don’t keep your money in the bank. A bank account is essentially a bucket with a tiny hole in the bottom. Inflation eats the value of your money, so it is worth a little less each year. Aside from a little emergency money, move your money into index funds and keep moving it every time you get paid.*
Get out of the car cult. At the very least, cut your transportation spending.
- On average, we Americans spend 2 hours of each day working to pay off our car habit. Is that how you want to spend 2 hours of your day?
- Move closer to work and walk or bike. The extra money you pay to live closer will be more than offset by the $706 / month you save on driving (see average cost of car ownership). Consider moving from a 2+ car household to a 1 car household
- If you must have a car (perhaps you’re having leg paralysis or your job is on a farm in rural Idaho), buy a small, gas-efficient car (used, obvs.) and optimize its efficiency.
- Rent out your car on Turo for extra income
Lower your housing costs. The Average American spends 33% of their income on housing. Add that to car spending, and you’re spending HALF your working hours on just housing and transportation.
- Embrace small-space living. Many financially free people have slashed housing costs by living in smaller spaces, even if just for the short-term. This couple paid off their $96k of debt by moving their family of 4 into a tiny house.
- Take advantage of geo-arbitrage — the idea that you can get the same lifestyle for much less money by relocating.
Meet your neighbors. Stop buying stuff, start sharing.
Learn how to do things yourself. You don’t need to outsource simple tasks like cooking, furniture repairs, and minor sewing. Cavemen (cave-people??) knew how to do this stuff. They cooked meat, and I’m sure they repaired their rocks all the time. 😉 Are you incapable of doing something a caveman could do?