Financial independence everyone wants it, but not everyone achieves it. Why? The reason is probably that financial independence is a process. It requires effort and commitment over a long period of time. Everyone’s definition of financial freedom is unique, which means that the path they take will be unique to them, too.

Unless you’re prepared to implement, and stick with, a dedicated financial plan for your life, financial independence is probably beyond reach. But what can you do if you’re truly serious about achieving financial independence?

What Do You Want Financial Independence to Do for You?

Financial freedom shouldn’t be about attaining a specific amount of wealth, or even a certain portfolio size. That’s the recommended strategy when it comes to retirement planning, but financial independence is actually much broader in scope.

Related: These Retirement Calculators Will Help You Determine How Much You Need

It should include a number of sub-goals, rather than some sort of grand strategy. That’s because financial independence is really about improving the various areas of your financial life. The end goal? Having more options and less money-related stress.

Sub-goals related to achieving financial independence can include:

  • Getting out of debt
  • Having a large enough emergency fund to cover predictable needs
  • Being on track in planning for retirement
  • Paying off your mortgage
  • Positioning yourself to be able to change jobs or careers, or start a business
  • Earning enough money that you can pay your bills, save money, and still enjoy life
  • Having enough financial padding so you no longer fear losing your job

Financial independence means different things to different people, so you’ll have to be very specific in defining it for yourself. Having that outline is critical, since the definition — and its subparts — will become your target goals.

Once you have that established, the next step is to create a plan to attain it all.

Convert Your Definitions Into an Action Plan

Once you’ve established the goals that define what financial independence is to you, it’s time to create a series of workable plans to turn them into your new reality. Since you’ll probably have several sub-goals, you’ll need a plan for each.

It is best to start with small steps, particularly if you have several sub-goals. These may include paying off debt, saving money, or prepaying your mortgage. Given that resources are always limited, you will need to decide on the workable amount of money you can allocate to each goal.

Alternatively, you may decide on a divide-and-conquer strategy, in which you focus on accomplishing a single goal first before moving on to the next.

For example, you may choose to build up an emergency fund before you begin to pay off consumer debt. You’ll accomplish the emergency fund goal faster by concentrating all of your effort on it. It will then be easier to begin clearing off debt once you focus on that goal. Then once consumer debts are paid, you can move on to the next goal, which may be paying off your mortgage early. And so on.

The key to accomplishing any goal is that it must be doable. If it isn’t, you may give up on both the effort and the goal. It’s better to move steadily forward in small steps, than to crash and burn with more dramatic efforts.

Implement Your Action Plan Immediately

Speed is important in accomplishing any goal, especially with a major life shift like creating financial independence. If you’re excited about the prospect of financial independence now, then now is when you need to get started. Delayed plans have a way of turning into non-plans!

Here’s another important point about moving quickly to implement your plans: the sooner you get started, the faster you can make the progress that will provide the incentive for you to keep moving forward. Momentum is so important in life, but the first step is to get it moving in your favor. Once you do that, the whole process becomes much easier.

Change Your Spending Habits

This is the hard part about achieving financial independence — the phase that most often keeps people from ever reaching their goal. When it comes to accomplishing anything related to money, you have to implement in your life the equivalent of a financial diet.

There’s no doubt about it–that will involve a healthy dose of self-denial. But you can’t think about it that way. Instead, you need to consider it a process of building extra room in your budget. This will then enable you to reach financial independence.

Start With Luxuries: How to Hack Your TV Bill

You’ll have to be serious, purposeful, and committed to this effort. It’s not a one-time event, but a virtual change to your financial lifestyle. If you treat it as anything less, all of your efforts will be moot and your goals will fall apart.

You must review all of your expenses. That includes big ones and little ones. If you are able to clear enough room in your budget by cutting or eliminating small expenses, the process may not be as painful. But it may come down to cutting a major expense or two.

It all depends upon what your definition of financial independence requires, and how quickly you want to reach it. If the bar is set high, or if you want to accomplish one or more goals quickly, you may have to start cutting the big stuff.

This can include trading down on your housing situation, or exchanging a late model car with a big monthly payment on it for a not-so-gently used one that won’t require financing. It may also require that you forgo vacations or some major purchases.

Related: Cut Expenses Now to Prepare For the Future

This may be an uncomfortable step, but there’s virtually no way that you will reach financial independence without implementing cuts in spending. (Unless your Uncle Herman leaves you his estate or you hit the lottery, of course.) It’s the key to success.

Save More Than You Thought You Could

If you have a heavy goal, such as early retirement, or you want to reach financial independence in a couple of years, you’re probably aware that saving 5% or 10% of your pay won’t get you there. Instead, you may have to become accustomed to saving 15%, 20%, 30% or more each month.

How Much Is Enough? Financial Freedom Savings Calculator

This won’t be as painful as it sounds as long as you implement the spending cuts we discussed above.

The same reminder applies to saving money as it does to making spending cuts. Just remember that it’s an ongoing process, not a single event. You’ll have to plan on maintaining your savings level for as long as it takes for you to reach your financial goals. That may be several years, so you need to build it into your foreseeable life plans.

Create a Workable Investment Plan

If your definition of financial independence includes long-term financial security, then you’ll need to create an investment plan. Saving money is critical, but so is applying ways to make that money earn even more money. That return on investment will complement your savings efforts, and increase your financial strength dramatically.

If you’ve never been much of an investor in the past, here are some strategies to put to work:

  • Create a portfolio model that’s consistent with your goals and circumstances. You’ll have to develop a portfolio that includes asset allocations that will not only help you reach your goals, but will also fit your risk tolerance. Come up with a balance between equity investments (stocks and real estate) and safe investments (cash and interest-bearing securities). The goal here is to come up with an optimal mix of growth and safety.
  • Get professional help. If you have no investment experience, you may need to get professional help. Fortunately, that help is more available and more affordable than ever. You can invest your money with “robo advisors”, which are automated investment platforms that will create a portfolio for you, and fund each asset allocation in a way that’s consistent with the portfolio mix.

Two investment platforms to check out include Betterment and Wealthfront. Either will manage your investments for you for a very small fee. All you need to do is fund your account on a regular basis.

  • Automate your investing. This is the best way to fund your investing activities, especially if you’ve never done so in the past. You can do this using payroll deductions that will transfer money from your paycheck to your investment account each pay period. Though many people already do this with employer-sponsored retirement plans, you can also do it with individual retirement accounts, non-tax-sheltered investment accounts, and even bank accounts and money market funds. When you make it automatic, the money builds up out of sight, and accumulates rapidly.

Learn More: 6 Places to Invest Your Cash

  • Favor index funds. Not many people are able to make money consistently by investing in individual stocks. The better approach is almost always to invest through funds. The best kind of funds is generally index funds. These invest in a specific stock market sector, or in the entire stock market. Not only does this strategy avoid poorly performing stocks, but it’s also very cost-effective. The fees involved with index funds are among the lowest for any investment type. And lower fees translate into a higher rate of return.
  • Be in it for the long haul. The financial markets don’t move in a straight line they zigzag up and down. The up moves feel really good, but downward plunges can cause you to lose your nerve. You can’t let that happen. For small investors, the best returns come over the long run, like years and decades. You’ll have to be willing to stay with your investment plan in order to get the biggest returns.

How far you go with any of these steps will depend on what your definition of financial independence is, and how quickly you hope to achieve it. The likelihood however is that you are going to need to implement most or all of these strategies at some point in the process.

How do you define your own financial independence? What do you think are the best ways to achieve it?


  • Kevin Mercadante

    Since 2009, Kevin Mercadante has been sharing his journey from a mortgage loan officer emerging from the Financial Meltdown as a contract/self-employed slash worker accountant/blogger/freelance blog writer. He offers career strategies, from dealing with under-employment to transitioning into self-employment, and provides Alt-retirement strategies for the vast majority who won't retire to the beach as millionaires. Kevin holds a Bachelor’s degree in Finance, and worked in accounting and the mortgage industry before becoming a writer.