10 Ways to Become Financially Independent

Posted by 30 October, 2008


This is part 1 of a series on 10 Ways to Become Financially Independent.

A lot of people talk about being rich, but I think they should be talking about being financially independent. I’ve outlined why I think you should be financially independent and its benefits in a previous article (link). I’ve also speculated what I think the US would be like if more people were financially independent (link). A lot of “rich” (I’m defining a rich person as a person with a high income not necessarily a high net worth) people often have to work very long hours to sustain their high spending or “rich” lifestyle. If they lose their jobs, these high spending individuals would more often than not have a difficult time keeping up with their bills without their high incomes unless they saved a substantial amount of money which is not usually the case as shown in the book The Millionaire Next door. The Millionaire Next door authors have spent their careers studying the wealthy and found that millionaires are typically people who spend much less than their income and usually are self-employed although not exclusively.

There are a lot of ways to become financially independent. I am not there YET so perhaps you should stop reading. However, I am very interested in becoming financially independent so maybe we can help each other along the way.

Sound like a plan Stan?

There are many ways to becoming financially independent. I don’t think most people become financially independent through any single method. I’m sure it’s an iterative process that usually takes many years, at least 10 (I threw that number out there), to complete.



1. Win the Lottery

I don’t believe in the lottery. The people that play the lottery are the same people that if they won, they would probably spend it all (my personal opinion and I have a lot of family members and friends that play the lottery). I would like to be proven otherwise, but that seems to be my perception. You need to respect money and the time (your life) that you spend to earn it. I’m still digging through books to find the books that are most beneficial in advice towards financial independence. Your Money or Your Life by Joe Dominguez and Vicki Robin had probably the most significant impact on me thus far. If you haven’t read it, you should. In the spirit of respecting money and the life you spend to make money, I would suggest you borrow the book from the library. If you really feel that you’d like to support me towards financial independence, it won’t make me cry if you buy the book through my Amazon store. Another companion book I would suggest is Getting a Life: Real Lives Transformed by Your Money or Your Life by Jacquelyn Blix and David Heitmiller.

The biggest factor to becoming financially independent is to play great defense, lower your expenses and curb your spending. Great defenses win championships, right? Well, if you want to have a championship team, you need a great defense. An offense, your ability to produce income, in my opinion, is more difficult to control, but we will explore those options in future posts.

There are a lot of books about lowering your expenses, but I’m only going to mention two of the more popular books.

  1. Your Money or Your LifeYour Money or Your Life is a great resource. Keep in mind that some of the information is dated and perhaps too progressive (baby steps) for your taste, but lowering your expenses is the most powerful part of your goal towards financial independence. There is an online study group as well as local meetings (depending on your location) that you can join to help your through your journey.
  2. The Total Money Makeover: A Proven Plan for Financial Fitness by Dave Ramsey – He has a great following and is very popular. I have personally never read his books, but I am familiar with his concepts. There are many Dave Ramsey study groups. I’ve seen many Dave Ramsey classes offered through various churches and I’m sure other companies and organizations offer them as well.

I don’t by any means want you to not eat or not have fun in life, but you should at least know where your money is going. If you are already on a budget, but are feeling deprived, Liz Weston @ MSN shows how you can “Live Well Without Busting Your Budget“. One extreme example of people that are cutting their spending is Jacob at Early Retirement Extreme. They cut their expenses in half by moving in an RV. I’ve also interviewed a couple that has been living in their RV for about a year (link).

Here are some other great blog posts and resources for cutting your spending or reducing your debt which can also reduce your spending:


  1. 40 Ways to Reduce Your Monthly Required Spending by Trent at the Simple Dollar – Here are some highlights from his post:


    Cancel club memberships Look at things like a health club, a country club, and so on. How often do you really use these services? If you’re using a gym membership less than once a week or a country club membership less than once a month, you’re likely throwing away money.

    Reduce or eliminate your cable bill For many people, this advice is beyond the pale, but it’s worth looking at. Perhaps you could trim back on your premium channel selection and just go with basic cable, or perhaps you could even eliminate your cable bill entirely – it will also help with electricity costs because you won’t be watching television as much and you’ll suddenly find you have much more free time.

    Look for inexpensive entertainment options Do you utilize the local library? Do you attend local community events like municipal band concerts and so on? Are you aware of local volunteer groups and organizations? Your community often offers many options for inexpensive or free entertainment of all kinds – you don’t have to have a big entertainment budget each month.

    Strongly reduce or eliminate travel We live very far from our extended families, so we are aware of the costs of travel. We’ve found that by being selective about what we travel to – and also open to inviting people to visiting us – we significantly cut down on travel expenses.

    Cancel newspaper and magazine subscriptions If you get a magazine or newspaper in the mail but simply don’t read it, cancel that subscription when it comes up for renewal, no matter how much you “like” the magazine. An unread subscription is nothing more than expensive clutter.

    Look at and consider reducing/eliminating other regular paid services Look at services like Netflix – are you really getting $19.95 a month out of these services? If not, just drop the service and look for other options, like a local rental store. What about satellite radio? If you use that but find yourself not using it or just sticking with the same things you listen to on regular radio (like NPR or top forty), then cancel the service.


    My favorite room in the house is the kitchen, but for many people it just seems more convenient to eat out, even though it’s incredibly expensive and not as much of a time saver as you might think. Consider these options.

    Cook (and pack) your own meals at home When you cook at home, make plenty so that you can freeze some of it for future meals and, even better, take some of it as leftovers to work, drastically reducing the cost of the typical workplace lunch. Some people may shy away from leftovers, but there are some secrets to making any leftovers as good as the original.

    Reduce or eliminate eating out or getting take-out Take-out and dining out can be a huge time saver for a busy family, but the expense can be tremendous – and it often doesn’t save much time, either. Instead, look at other options for dining at home: prepare lots of meals at once and freeze them for easy cooking later, focus on simple recipes, and choose recipes that utilize the fresh produce in season in your area.


    Eliminate services (housecleaning, landscaping, etc.) If you hire out household services to others, consider trimming back or eliminating them. Instead, put aside some time each week to do them yourself – not only will you save money, but you’ll find that many activities can get the whole family involved (like housecleaning).

    Reduce or eliminate consumable habits (smoking, alcohol, etc.) Any consumable habit, whether it be smoking or excessive drinking, can be a constant drain on a budget without any real benefit. Give the habit a kick in the pants and your wallet will breathe a serious sigh of relief.

    Move to a less expensive area Many people leave this option out when looking at trimming their budget, but if you can find work in another area, it may be worth considering. Look around at other areas of the country where you can find employment, see what your salary would be there, and look at the housing costs. Quite often, you’ll find yourself significantly ahead by looking at areas like Minneapolis rather than areas like San Francisco, even at a significantly lower salary.

  2. 10 Ways to Cut Spending by Kristine McKinley at Ms. Financial SavvyHere are some highlights from his post:

    Consider dropping your home telephone line. Your cell phone is probably all you really need, and most likely it has free long distance. You could save $30 or more per month by dropping your “land line”.

    Cut back on trips to Starbucks or other premium coffee shops. Often called the “latte factor“, spending several dollars per day on luxuries like premium coffee can really add up. For example, if you spend $4 for a cappuccino five times a week for 50 weeks out of the year (you�re on vacation the other two weeks), you would spend $1,000 in a year. Try treating your trip to Starbucks as a treat instead of a habit.You’ll save money and probably lose weight too!

    Pay your mortgage payment bi-weekly instead of monthly. You’ll pay less interest and pay off your mortgage faster.

    Carry cash instead of credit cards. Psychologically it’s harder to spend cash than it is to use the credit card.You’ll spend less and save on interest charges.

  3. 8 Ways to Cut Back Without Sacrificing by Kimberly Palmer at US NewsHere are some highlights from his post:
  4. Host movie night. Going to the movies, especially if you’re a popcorn fan, can easily cost $40 for two people. Instead, suggests Faye Griffiths-Smith, community leader for the American Association of Family and Consumer Sciences, rent a movie and invite friends over to watch.

    Learn to cook. Not only does eating at restaurants add up, but so too does buying lunch. If you cook dinner at home, you can bring in leftovers to work the next day or take a few minutes to pack a sandwich. If mornings are always rushed, then try packing it at night before bed, suggests Jean Austin, family and consumer science educator for the Maryland Cooperative Extension Service. And when you shop for your ingredients, make sure you have a snack first. Going to the grocery store hungry often leads to impulse buys, Austin warns.

    Drink at home. Whether your beverage of choice is green tea, espresso, or beer, it’s much cheaper when consumed in the comfort of your own kitchen. Going to a bar with friends can easily cost $50, McDonnell says. Instead, pick up a six-pack and hang out at a friend’s house. The social interaction will cheer you up without the hefty bar tab.

    Decide what you really want. Most people can cut 10 percent of their spending within 10 minutes, says Ramit Sethi, author of the I Will Teach You to Be Rich blog. Just write down your major spending categories, such as food and loan payments, and then guess what percentage is going to each category. Make a second list with what you want the percentages to be, and then make a third list describing what they actually are. If the reality doesn’t match up with your ideal, then adjust your spending.

  5. How We Became Debt Free in One Year by Rachel and Doug at Small NotebookHere are some highlights from his post:
  6. We rented an apartment instead of buying a house. We still live in an apartment, but it’s because we want to, and it’s been a good decision financially for us.

    We furnished our apartment with second-hand furniture instead of buying new.

    Our income tax refund was sent to pay the debt.

  7. 101 Ways to Reduce Spending and Keep More of Your Money by Blunt MoneyHere are some highlights from his post:
  8. Transportation

    New cars – Don’t buy new cars in first place. Really, don’t! Buying a new car is like throwing 20% of your money out the window as you drive off the lot. Not to mention that new cars are often financed, and the insurance rates & tags are higher. Buy a used car instead. Get it detailed & spray in some new car scent if you want the same effect. (Although what makes your car smell new are mostly volatile organic compounds.) If you decide to buy a new car anyway, research the heck out of it first using sites like Edmunds and Kelley Blue Book. Call your insurance company before buying to make sure that it’s not a model that will cause your rates to skyrocket. Know your bottom line before going in, and exactly what you are and are not willing to compromise on. Set up competition between dealers. Be prepared to spend a lot of time at the chosen dealer and then walk out. (Leave your kids at home, bring a snack, and don’t buy a car on your first visit to the dealer.) If you are financing, get your financing first, elsewhere. Refuse to talk “payments”or trades — talk only the total price of the car, tax & fees included. Avoid extended warranties and other extras.

    Used cars – First, there is nothing wrong with a used car. They’re great, in fact! And you can save tens of thousands of dollars by driving them instead of new cars. Many of the tips listed under the New Cars section apply to buying used cars from a dealer as well. The biggest difference when buying a used car is that you may get a better deal by going through a private party or auction. Just bring someone with you who is knowledgeable about cars, and have the car checked out by a trusted mechanic before purchasing. Also, it’s usually easier (or at least faster) to negotiate with individuals. If you’re buying at auction, you’ll likely need literal cash in hand to do the deal, and it’s unlikely that you’ll be able to thoroughly inspect the car (or even to turn it on). So be prepared for some additional expenses with those. Still, the deal you can get at an auction might make that worthwhile. For auctions, set a maximum price that you’ll pay and quit bidding the moment the auction goes over that price. There will be other cars. LOTS of other cars.

    Food and Drink

    Coffee – Kick the habit, or make your own & bring it with you. With luck you might even be able to convince your office to use a brand that people like, and get your fix at work. If you do buy your coffee at a coffee shop (Starbucks, anyone?) bring your own cup for a possible discount. You can also get Starbucks gift cards at a discount at Costco right now. (Approx. $80 for $100 in gift cards.) Nothing says you can’t use a gift card for yourself.

    Processed foods – Eliminate as many processed foods from your diet as possible. Both your body and your bottom line will thank you. If you do buy processed foods, consider store brands. They are often made by national brands, but sold for a fraction of the price. Most stores offer a money-back guarantee on their brands, so you really have nothing to lose if you’re dissatisfied. Stock up when processed foods go on sale as well, since one advantage of processed foods is that they often have enough preservatives in them to last a long time.


    TV services – You can now watch many TV shows online for free on sites like CBS, NBC, Hulu, etc., so you may want to consider eliminating your cable or satellite altogether. But if you’d rather keep them, make it a habit to call up regularly and ask for discounts. Figure out exactly what you want first, and then ask what the cheapest way to get it is. (Just be sure you’re not getting a promotional offer that will quickly expire.)

    Parties – It’s tacky to invite people to a party and assign things for them to bring or charge a cover charge. But it’s NOT tacky to have a potluck, or to only serve snacks. Better to have the party you can actually afford, than to “host” a fancier one and expect others to pay for it. Remember that a “party” can be as simple as game night with chips & salsa. The point is to have fun with your friends and family.

    Health and Beauty

    Dry cleaning – I’ve saved hundreds of dollars over the years by doing one simple thing: I refuse to buy things that say “dry clean only”. Not only does this save me money and time, it helps the environment too. If you do have clothes that require dry cleaning, remember that they don’t need to be dry cleaned each time you wear them. Get yourself a clothes brush to brush them out after wearing and hang them up to wear. Only get them cleaned when they really need it.

    Massages – Inexpensive massages are available from massage schools and places like Massage Envy. You can also learn to give massages yourself for just the cost of some oils.

    Prescriptions – All prescription prices are not created equal. Especially if you have a recurring prescription, call around to different pharmacies to see what they charge. You can also take advantage of pharmacy coupons. And did you know that Costco offers prescriptions? Drug companies provide free drugs to those who qualify. Generics are another money-saving option, as is asking your doctor for samples if it’s unlikely you’ll be on a drug for a long time or if you’re not sure how effective the drug might be.

    Flowers – Flowers from farmers markets, the grocery store, Costco, or even your own yard can be much cheaper than flowers from a florist. Spend a few minutes learning how to arrange flowers, pick up a vase at a thrift store or garage sale and you can have beautiful arrangements at very little cost.


    Cleaning supplies – The only cleaning supplies we use in our house are now vinegar, baking soda, and Barkeeper’s friend. These products work wonders on our house, save big bucks, and are better for the environment.

    Electricity – Some simple ways to save on electricity include turning off the lights, unplugging items that produce phantom loads (usually anything with a “brick” that plugs in), caulking or weather stripping to seal leaks, adding insulation, switching to CFLs, etc. See the U.S. Department of Energy’s site for additional ideas.


    Clothes – Resale stores and EBay are great places to buy inexpensive children’s clothes. Talk to friends and relatives with kids of various ages to arrange a hand-me-down type circle. Some children’s clothes get so little wear that they’re just like new, and you can get them for free this way. On the other hand, sometimes kids can be really hard on their clothes. In that case, consider joining Sears’ KidVantage® Club, which replaces kids clothing & shoes for free if they wear out before your child outgrows them.

    Toys – Kids generally have more toys than they know what to do with, and after awhile they become just so much clutter. To avoid buying still more toys, begin putting away some of their toys temporarily. The remaining toys will be more appealing since they will stand out more, and you can rotate them for the ones you put back at regular intervals. That way they’ll always have something “new” without the extra expenses. Garage sales are good places to find used toys as well. (Just be sure that they are not on a recall list.)

Are you interested in being Financially Independent? If so, why?

What are you doing to curb your spending? We recently sold a house and were able to pay off a car and a few smaller student loans (link).

Photos by M_Eriksson, Midweekpost, and Jeff Keen


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October 30, 2008

I try not to buy Starbucks but I do. I should at least use your Costco gift card idea!

Great post!

Posted by Ray The Money Man
October 30, 2008

Great info. I just wanted to let you and your bloggers know that Equity Express is now offering free biweekly conversions on existing and new mortgages. Normally costing a few hundred dollars, it’s now free to the consumer to help ease expenses in these trying economic times. Equity Express (888) 438-5536

Posted by Mike Norman
October 30, 2008

I have done all this and more. Trust me living cheaply can be easy.

Posted by Dody Bush
December 20, 2010

This is appalling. Do you really think that the people who are struggling are so irresponsible as to spend all their money on Starbucks? There’s no discretionary income to spend on that. You’re like those idiots who say things like, “Have you thought about getting a job?” Well, duh.

Posted by Kathy
February 8, 2011

As a person who has achieved this,I can say its 10 times better than you can imagine

Posted by Bill Spetrino
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