5 Steps Toward Financial Independence – Reworked

Happy Holiday Weekend – which is now already fading as a distant memory of fun and relaxation, as your work cubicle begins to close in on you ….

… although I’m still (technically) on vacation, I’m cutting my blogging-vacation short out of sympathy and because I’m just bursting to share this post with you 😛

Sarah Winfrey – on Wisebread – provides her 5 Steps Toward Financial Independence … I want to share them, then rework them slightly for you.

First, Sarah says:

Whether you’re a brand new grad or regrouping after a layoff or other financial difficulties, you may find that it’s more difficult than you’d imagined to wean yourself from any monetary help you’ve been getting.

1. Get a Job

2. Know Your Expenses

3. Commit to Saving

4. Prioritize Essentials

5. Give Yourself a Deadline

It’s generally good advice, and you should read the whole article here, but this wouldn’t be $7million7years if we didn’t have our own take on things:

1. Get A Job

Losing your job (or graduating college and finding it hard to find that ideal, first grad. job) shows you how fickle the world of employment can be. There’s no safety in employment any more, so you may tempted to become your own boss. But, there’s no safety in business either!

Look, I love the idea of people going it alone and starting a business, but a job provides three things that you might need:

– Cash to live off

– Starting capital for business and/or investing (your ‘war chest’)

– A safety net, in case your first business or two fails.

So, I recommend that you go ahead and get a job … and, start that business on the side!

2. Know Your Expenses

This one is easy … if you try the ‘no budget budget’ ( http://7million7years.com/2009/05/04/i-hate-budgeting-so-ive-only-ever-tracked-my-expenses-once/) 🙂

Hopefully, you already tried this – when (if) you were working – but, now’s a great time to try this again … just for one month.

3. Commit To Saving

Now, this should be easy: if this is your first job, then you’re used to living off nothing, so 50% of something must seem like a HUGE payrise to you. Regardless of whether this is your first job, or you are reentering the Rate Race (I mean, work force), you should treat this as Found Money and aim to save 50% of your income.

If that’s not possible, work your way back from 50%, all the way down to 1% if you need to …

… just remember that your eventual target should be AT LEAST 10% of your net income over and above whatever goes into your 401k.


Remember that business/investing war chest?

You need access to your money, so start building your savings outside of your 401k, as well as continuing to fund your 401k. But, you should simply treat anything that goes into your 401k as a safety net, much as a high-wire artist treats their safety net as something that’s there but NEVER to be used … except if you fall!

4. Prioritize Essentials

Remember that ‘no budget’ budget?

Now’s a great time to go through it with a fine tooth comb and identify any excesses … and, eliminate them.

And, to help you stop spending money unnecessarily, it’s time to stamp out that Impulse Buying Bug once and for all!

The best tool that I have found to help you do that is the Power of 10-1-1-1-1 card, which should be laminated and sitting in your pocket – well worn from overuse: http://7million7years.com/2009/04/23/the-even-greater-power-of-10-1-1-1-1/

5. Give Yourself A Deadline

Sarah means this as a deadline for getting your financial house in order, but $7million7year readers have a much more important deadline: Your Number / Date.

In case you missed the last three years of posts, here’s where to find:

Your Life’s Purpose,

Your Number, and

Your Date.

By the time you work all of this out, you’ll be in a hurry to get a job and start your active business/investing program 🙂

Be Sociable, Share!

4 thoughts on “5 Steps Toward Financial Independence – Reworked

  1. Re 1.) Get a job

    I think it should read “Get a great job”. Remember that you will need to spend the majority of your waking hours working, preparing or recovering from a typical job – so if your job sucks, your life will suck. Further, it is much easier to excel at something you enjoy vs. something you hate -and being good at your job usually pays huge dividends.

    So I think people should invest in finding a great or at the very least a good job.

    Maybe you need to work a crappy job for a while to tie you over, but don’t tread water, keep pushing.

  2. Getting the right job is important. But what does the “right” job mean?

    You can either get a job which will help you on the path to entrepreneurial success – developing the right skills, making the right contacts, paying enough money to let you build seed capital and giving you enough spac to undertake your side business.

    Plan B is a job that pays a lot of money – enough to get you where you want to be financially within an acceptable time period.

    I ended up doing the latter. Quite frankly it has taken me far too long. By Adrian’s standards I am a colossal failure 🙂

  3. @ Traineeinvestor – We tolerate failure here 🙂

    Of course, if you’re already living – or on track to live – Your Life’s Purpose, then the money (and how you get it) is moot. Also, you can build a fine perpetual money machine, by throwing in as much coal (presumably a high paying job provides plenty of spare income?) onto the fire (buy/hold -eventual income-producing investments) as possible, right?!

Leave a Reply