Guide to Financial Freedom (II)

Let’s continue our look at the idea of financial independence, or as many say, financial freedom. Perhaps you still see the picture we suggested in my previous article of the neon sign flashing before your eyes now.

Financial Freedom!

We need to take a more in depth look at the one key element that is least understood. That element is the mental and emotional attitude toward money that is essential if we want to achieve a sense of freedom, financially speaking. The failure to understand this attitude probably explains why so few people ever experience real freedom in the financial realm.

Let me remind you first, however, of the obvious. Financial independence is not just a matter of attitude. In fact we have observed in our preceding article that there are four key skills/practices that must form the foundation for any sense of freedom in our financial lives.

In my office I have a very nice leather recliner. It is really comfortable, and I must say it looks good, too. But the chair wouldn’t sit right at all if any of the four legs failed. Those four feet are small compared to the main part of the chair but they are absolutely essential to support everything above, including me when I am sitting on them.

Four Undergirding Foundations
of Financial Freedom

  • set correct priorities
  • exercise self-discipline
  • live debt free
  • effectively manage resources

Financial independence is a lot like that. The way we think and feel about our money, about the adequacy or inadequacy of the money we have to meet our needs, about the dependability of our income, and about the extent of our financial obligations, is paramount.

But at the same time, much of our ability to develop a positive viewpoint in these areas depends on how well we master those four skills/practices we discussed in some detail in Guide to Financial Freedom (I). They give us a foundation upon which to build.

If necessary go back to the first article on financial freedom for a discussion of these four priorities to be sure you understand how they effect your capacity for money independence.

Obviously these are challenging undertakings but they are not too hard for any of us to master if we really have a sincere desire to achieve our goal of financial independence.

After establishing these four footings to build on, here is the mortar that joins them all together, the fifth and arguably most critical foundation of financial freedom. To stay with our image, it is like the chair seat we sit on supported by the four legs beneath. It consists of the thought habit that leads to actually experiencing financial freedom.

The True Basis of Financial Freedom

Financial independence is not a product of having a certain level of income, nor is it the consequence of having a certain amount of wealth. It is an internal emotion more than an objective reality, generated by an inner attitude rather than outward circumstances. It is the consequence of a chosen money mindset.

This is one attitude that cannot develop without real progress being made toward changing our physical or material circumstances. The four steps we previously outlined identify clearly the nature of those changes. But that having been said, financial freedom requires adopting a pre-requisite attitude about our financial circumstances.

Attitudes are habits of thought. Most people develop attitudes that keep them enslaved to financial obligations. In order to experience financial independence later we must first change our thinking about money now in specific ways.

If we think debt is OK or if we think we don’t need to be saving money there is a weakness in our thinking that practically prevents us from ever experiencing financial independence. It doesn't matter what excuses we come up with, they are all the product of defeatist attitudes.

The first mental step toward financial freedom is to firmly commitment to becoming financially independent.

The first mental step toward financial freeedom, then, is to firmly commitment to becoming financially independent. That means making a firm decision to develop the four skills/practices we have identified. Then we must adopt and reinforce positive attitudes toward achieving money freedom.

We must begin doing the necessary work involved and keep working on them until they are reality. These three steps are all necessary:

  • Firmly commit to becoming financially independent.
  • Adopt essential goals and attitudes toward achieving these goals.
  • Keep working on these goals and attitudes until they are achieved.

Not every process or experience in life is simple or easy. This is one of the more complex and challenging, that is why so few people ever achieve it. But I believe it is achievable for anyone who takes time to understand it and commits themselves to the goal, at least if they start soon enough. Obviously it gets much harder with age.

Your sense of money independence does not come automatically. Financial freedom is a way of thinking about your money that even if you are wealthy you must choose to adopt. It is also important to begin feeling this sense of freedom early on in order to build enthusiasm and motivation to keep moving toward its full achievement.

But since this can only be achieved as financial circumstances improve, this means that at first it is best to focus on changing your attitude toward building the foundations for financial independence, that is the four skills/practices we have identified. As progress is made on that front begin focusing on the relationship of those experiences toward your goal of financial independence.

One of the key foundations for financial independence is eliminating debt. An explanation of how this process works may help us see that it is, indeed, a workable undertaking.

Becoming debt free will take no more than 5-7 years for almost anyone.

John Cummuta (Transforming Debt into Wealth) has shown how an effective program for becoming debt free will take no more than 5-7 years for almost anyone because all the lenders use formulas that fluctuate according to income to limit people from getting more than about that far into debt.

Even if you are not reaching your limits you may still have debt that will take several years to eliminate, of course. But it is very unlikely that it would need to take longer. To protect themselves, lenders just don’t loan people more than so much (although from the stress people experience with their debt, it is obviously too much anyway).

To become debt free you want to focus your attitude changes to move you in this direction. As your debt decreases you will feel a lot of joy in this achievement. You will also feel a real decrease in the feeling of being controlled by debt. At this point you will want to transfer this feeling to an association with your goal of financial independence.

In this way your sense or feeling of money freedom will be a growing experience. Every time you eliminate another obligation you will feel more freedom, as long as you have adopted the attitudes (thoughts habits) that assure you will not adopt a new debt to replace it.

Every time you add to your Roth IRA (or other retirement fund) you will feel a little better prepared to live without your paycheck. And so it goes with all of the related skills which reduce your mandatory expenses or increase permanent income.

Objective Basis for Financial Freedom

We have seen that some people with enormous fortunes are completely absent any sense of financial independence. At the same time others with far less wealth feel completely free from any sense of confinement.

Assuming you have achieved a reasonable degree of success in the skills/practices identified above, the key for being able to experience this sense of freedom is in discovering an objective basis for measuring it.

Reducing Living Expenses

One of the objective steps to financial freedom you need to determine is the amount of money required to meet your basic living expenses. Over time you can reduce your financial requirements, largely by reducing obligations. For many, perhaps most, getting rid of credit card obligations is a game changer.

Personally, I can look back at a time when my wife and I both drove new cars, fully financed. One time we each bought and financed new cars only about two weeks apart. It pains me to remember although I thought it quite normal then!

Obviously we need less money monthly for essentials now that we no longer even consider borrowing money to buy a car compared to what we would if we still thought the way we did then.

Note:The bottom line is, the less money you require to live the less income you will need to feel financially independent.

For those who achieve it, the first month there is no longer a house payment will be the most dramatic cost of living reduction they will ever experience. There are many other ways to reduce your monthly obligations we discuss elsewhere. The bottom line is, the less money you require to live the less income you will need to feel financially independent.

Increasing Passive Income

The second objective measurement of financial freedom potential to look at is retirement income. Unfortunately, for many people the only income they can anticipate in their latter years is Social Security.

If you are intellectually engaged with your financial future enough to be reading this I assume you know how far you can depend on that to pay your way! But it is worth a little.

For most of us a Roth IRA is likely the most useful vehicle for financial independence or retirement savings.

For most of us a Roth IRA is the most useful vehicle for retirement or financial independence savings. Money market savings accounts and bank certificate of deposits offer less earnings, but those getting older and needing very safe investments have easy access to steady incomes from options such as these. You may have real estate or other income sources.

The choices are endless. The idea here is to set out your own passive income program and develop it until you have fully enough to support yourself with or without regular employment.

Claim Freedom—a Mental Challenge

Believe it or not, the most challenging step in becoming financially independent may be the mental one of actually claiming it for yourself once circumstances permit it. All that we have discussed until now is primarily preliminary to this step, making a fundamental change in our thinking.

Unless you claim it, unless you can choose to say and believe that you need no longer worry about money or feel constrained from living the life you want because of financial considerations, you may have a mountain of money but still be its slave. Once you are able to make the mental commitment to declare your independence, however, you may find an incredible freedom to enjoy your life in a way never before imagined, even in your dreams.

Here is an important concept to consider at this point. Many money people promote the irrational idea that financial independence means being able to do anything you want, any time you want, without regard for the cost. There are many high flyers in the world, but clearly many of them are slaves to their life styles and many of them have no sense of happiness and freedom.

Financial independence means being able to live in the way that truly brings us the most pleasure. How much money that requires will be different for each of us.

Ask yourself what really makes you happy. The truth is that most of what brings us joy takes no money at all. Associating financial independence with a lifestyle unrelated to our own priorities and interests is irrational.

Financial independence primarily means being able to live the life we choose, free from obligations we cannot easily meet with or without what we normally call our “job”. It means being able to live in the way that truly brings us the most pleasure. How much money that requires will be different for each of us.

Don’t associate money independence with unrestrained spending. That is the surest way to picture financial independence in a way that is really impossible for anyone to experience.

Financial Freedom—Sooner, Not Later

Now for some really exciting news. You don’t have to wait until you reach some hypothetical retirement age to experience the benefits of financial independence.

You have already seen that you can recognize and acknowledge a significant part of that freedom as you accomplish each part of your financial plan such as getting rid of credit card obligations, paying off personal loans, eliminating the mortgage, and establishing a consistent savings habit. Each of these can increase our experience of freedom, financially.

Once you reduce your obligations and increase your automatic income to matching levels, you can declare your freedom completely. You can do it at any age and at any level (within reason) of income. And you do not have to give up your “job” to do it, unless you want to do so.

Find a Job You Love

One potential for early success, at least partially, is to find a career that is personally satisfying and secure. Many jobs are uncertain. It is hard to feel at ease about your money if you are worried about down sizing at your company.

Back when I was in college I met a Fuller Brush salesman who expressed great joy in his work. He told me that not only did he love sales, he knew he could always make a living at it. A good salesman is always in demand and income is unlimited. He enjoyed going to work every day as he made every sales call like a visit with an old friend.

Another opportunity today is nursing. The nursing shortage is not only great, it is certain to remain so for decades.

When you love your work, and would enjoy doing it even if you did not have to, you experience what might be described as partial financial freedom. It is not your ultimate goal, but is worth a lot if you can do it.

These jobs may not be of interest to you, but there are many jobs in any field that can offer better security than others and if you learn your trade well your quality will always make you marketable.

When you love your work, and would enjoy doing it even if you did not have to, you experience what might be described as partial financial freedom. It is not your ultimate goal, but is worth a lot if you can do it.

Personally I would rather work longer at a job I like than to reach my ultimate financial freedom goals at a younger age working at a job I dislike. In any case, if you enjoy your work you will enjoy working on your financial objectives a lot more.

Income Level is Not the Key

CNBC has hosted a television show called The Millionaire Inside. I watched an episode in which one panelist observed how important it was to find a job you love. There was an amazing chorus of reinforcement from others on the panel.

The theme was that there were plenty of millionaires who worked as janitors or other common jobs and plenty of lawyers and other professionals who were broke. No matter what you really love, you can make a living doing it. If you determine to do it.

It is not what you do or how much you make, but how you manage your money that makes all the difference. So don’t be nearly as concerned about how much you make as in whether you can enjoy what you do.

The key thought for us here, however, is that you are largely freed from feeling that you are a slave to financial constraints even while you do work at a regular job if you are working at something you would do even if you did not have to do so for the money—as long as you have more than enough money to meet your obligations. The money is just a bonus.

Many financially independent people demonstrate this truth every day. Do you think Oprah really has to work? Or Bill Gates (he essentially works for free now with his foundation though officially retired)? Or Warren Buffet?

Make it your goal to eventually reduce expenses and increase income outside your work so that you could stop working whenever you want.

Nevertheless, you will want to make it your goal to eventually reduce expenses and increase income outside your work so that you could stop working whenever you want or should health problems intervene.

Even though you can feel almost complete freedom while working at a job you love, if a job is necessary at the time in order to meet expenses complete freedom comes at the point when it is not required.


In summary, remember the principle. Financial freedom, or financial independence, is not generated by temporary levels of wealth or income but by setting correct priorities, exercising self-discipline in financial decisions, living debt free, effectively managing resources, and claiming it as a personal emotional and mental attitude.

Begin by firmly committing to your financial freedom plan as one of your top priorities in life and leave no room to deviate from daily work toward money independence.