Extreme frugality is not sustainable and most people who try to achieve financial independence using frugality and willpower alone will fail. Especially if your time-frame is 15-25 years, rather than the common media coverage of those who reached financial independence (FI) in 5-10 years (in a bull market). Finding a formula for achieving financial freedom on a regular income, whilst enjoying life is a serious challenge and raises the following questions:

  • Will it require discipline and willpower?
  • What kind of person does it take, do I have it in me?
  • What will I be giving up to reach my financial goals?
  • How do I not get obsessed with the numbers?
  • How do I avoid wishing my life away?

As this extended period before Financial Independence is a substantial part of our life, we must be careful not to cause detriment to it. You cannot scrimp and save and avoid purchases that bring you joy for 20 years of your life. Otherwise what’s the point? Yes, you may reach FI marginally quicker but you will have lost some of the best years of your life fretting over every purchase.

So Why Pursue Financial Independence?

I believe it’s important to really dig deep into the psychology of Financial Independence and find out what we can do to ensure we save money and still live a fulfilling life. How can we approach saving and investing in a way, that one day we just wake up and we’re already there? Ideally, we want to live such a great life that the journey has passed in a blink of an eye. Almost to an extent where, it almost doesn’t matter that we are finally financially independent, because we like how our lives are.

Financial Independence is perceived as being either supplementary in enhancing our lives or even fundamental to our finances. However, even the latter is not usually the driving factor for someone to pursue FI. What usually is the motivator is the time-freedom associated with FI but the time-freedom to do what exactly? This is the first hurdle that FI can fall over and something we need to tackle.

Understanding why we are making significant financial commitments to such a long-term goal is one thing. Being happy with the lifestyle this dictates is another. So we need to ask why we are doing it and how we are going to sustain it, otherwise we’ll never make it.

Will it require discipline and willpower?

Yes, I think there is a degree of willpower involved. Although I don’t think this is the most important aspect to master. I think willpower will be involved because we need to understand how to use it to our advantage, and not as an unlimited resource to accomplish our financial goals. We also need to stay the course when the stock market drops and we get jittery. Read my thoughts on how to increase your willpower to save money, invest and pay off debt.

What kind of person does it take, do I have it in me?

I think that being a certain type of person may help but I think with the right actions, long-term saving and investing is highly achievable for anyone. Someone who takes steps to understand the underlying reason they want to achieve Financial Independence and set-up the structures to realistically get there, should in-theory be just fine.

Someone who is likely to do the research and understand the logic and maths behind their financial plan, is also likely to fare well. As opposed to someone who follows the crowd and doesn’t their pessimistic inner voice and that of others when the market takes a down-turn.

This requires developing optimism, hardiness and efficacy. If you are worried about how you will be impacted during the investment stage of this process, you can read the 10 simple rules I outlined for myself, which have worked for me so far.

What will I be giving up to reach my financial goals?

You need to understand what you’re giving up, because you can’t have everything, it might be more expensive clothes, nights out every Friday, pricey tech items or fancy meals out. Something has to give to curb lifestyle inflation. However, I have found the trick is to understand the habits that don’t bring us additional joy and cut those out first. Simply, we need to save without suffering for us to save long term, read my 8 simple ways to do this.

We need to offset those boring or stressful times at work, with fun at the weekends. You can’t have a tough week, only to suffer on the weekends because you’re trying to save. You can’t lock yourself in the house until you achieve FI. You need spending outlets, so don’t cut things you enjoy doing and what you also need to do is find the most effective ways to buy happiness.

How do I not get obsessed with the numbers & not wish your life away

What I have found has worked best for me is finding a creative and useful output for my obsession with FI. I needed a productive way to think about the saving, investing and statistics behind it; the output of which is this blog. This sense of purpose is one that I would like to take into FI.

As I’ve come to learn more about blogging, I’ve also learned more about online business and that’s something that I think I will continue with regardless of financial Independence. I want to enjoy my career and I hope that my 3 month career break will rejuvenate my enthusiasm for this.

You can read about the reasons I quit my job to travel here. That being said I would enjoy blogging full time if that was ever an option, I would take it!! There are 5 very good reasons I say this, and these apply to you too.


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7 Actions To Keep You On Track

Action 1: Find Your Why

The point is, you have to find your own definition of wealth. Money and Financial Independence in itself is not enough. Targeting a portfolio value is not enough to keep you on track. You need to know why you are saving and investing a high percentage of your income. Many people out there would like to be millionaires, it’s why many people play the lottery. However, if pushed for an answer on why, probably wouldn’t be able to think of a good one?

I Always Plan To Work In Some Capacity

When I really think deeply about it, I actually think my approach to life really wouldn’t change that much if I won the lottery. Maybe this is part of the reason I don’t bother playing. Apart from the security of not having to worry about an income, accommodation or putting food on the table, I would carry on as I am.

I would still work, I would still challenge myself etc. What would change is the financial security that would allow me to explore opportunities, set-up anyway in the world without rushing to set up an income when I arrive in advance. As a result I could explore living in new countries and experience new things without the stress that comes with it. This is one of the things I’ve learned from moving to Australia.

The 2020 Covid-19 pandemic and financial crunch has taught me that I always want to be prepared financially to support my family and passive income would allow me to do just that. This will be one very important reason to continue to push towards FI.

Why Do You Want To Achieve Financial Independence?

To understand this, I think we need to go beyond the surface level motivations of “I want freedom” or “I don’t want to work forever” or “I want to be able to travel more”. These are valid but I think they are just a starting point. For example …

  1. I want to achieve enough passive income to achieve my lifestyle needs without having to rely on a salary from an employer
Why is this important…
  1. I need to do this so that one day I can pursue my passions and interests without trading time for money (although I hope I’ll be successful that they will generate money themselves).
  2. I want to have complete, or predominant control of my time, without having to commit arbitrary amounts of time (e.g. 37.5 hours per week) to earn money.
Why is this important…
  1. This will increase the potential time I can use to achieve a measurable impact.
  2. Subsequently I can live a more fulfilling life, set my own goals and measure my accomplishments by something I have created or the number of people I have helped.
  3. Ultimately, I will be able to spend more quality and volume of time with my girlfriend, family / future family, this is because I can balance my time as I choose.
  4. I will be able to engage in experiences that make life worthwhile, such as travel and this will also lead to increased wellbeing.
Why is this important…
  1. Because I don’t want to look back with regret and realise that I spent the majority of my time in an office, earning bigger bonuses for CEOs and dividends for shareholders.
  2. I don’t want to look back and realise I spend the majority of my time carrying out tasks which have no personal meaning to me.
  3. Instead I want to live a fulfilled life full of amazing experiences with the people I love and this is how I want to measure my life, not by my salary or position within a company.

Action 2: Identify What You Enjoy: Spend Lavishly On It

There is the extreme frugality side of personal finance argument, where spending money on luxury or convenience is demonised. If you enjoy drinking coffee out, or you like to buy expensive clothes or eat at expensive restaurants; then in my opinion this is absolutely fine. There are things that make us happy and sometimes that’s a good quality item or a premium experience.

In my opinion you have to spend lavishly on the things that make you happy whilst mercilessly cutting back on what you don’t. What it does for me is travel, experiences, good food and enjoying good quality coffee.

For example, each year I’ve consistently gone on 2 to 3 city breaks and one two week holiday each year, whilst visiting places around the UK in between. This year we decided to spend 25 days in Vietnam, 2 weeks in Malaysia and 3 weeks in Indonesia before reaching Australia. We did some really amazing stuff like, swim with turtles!

Back in the UK I would buy myself £7-9 bags of coffee every couple of weeks from a subscription service and get it delivered. In Melbourne, they have some of the best coffee in the world, so I have little guilt in treating myself to a takeaway coffee.

On the other hand, I don’t really care much for expensive clothes, drinking in bars and I can happily have water with my meal at restaurants. I don’t need the latest iphone or mac, a budget phone with a decent camera and a simple chromebook suit me just fine (as long as the specs are good).

The task here is to name three things you enjoy spending your money on, and don’t be hard on yourself for spending money on them. So don’t be discouraged if you have expensive tastes, you just need to slowly curate what makes you happy, rather than perceive the volume of things you like and how much you buy them.

Action 3: Challenge Your Money Script

Most people talk negatively about money or they don’t talk about it all. People learn about money from parents and can often learn negative connotations about money through them, money is a painful place for many people. On the other hand money as a conversation never really existed, or may it did with limiting guidelines

  • Many people say “you can’t take it with you” (so why bother saving)

  • “We can’t afford that” or “we could never afford that”.

  • “Money doesn’t buy happiness”

  • “Rich people got very lucky” – The idea that only very few people can earn wealth.

  • “The stock market is risky, the only safe investment is property” – this indicates that wealth is not achievable through regular means.

  • I remember a family friend telling their daughter to ”save 10% of your income, spend the rest”. Why not aim for 20-30% if that’s a comfortable baseline?

  • The ‘wealthy people are greedy’ or ‘wealth is bad myth’ – I remember hearing this one when my parents used to take me to church when I was a child: “it’s easy for a camel to pass through the eye of a needle than a rich person to get into the gates of heaven”

  • Should you “jump out of the frying pan into the fire” – the idea that you shouldn’t take educated risks to increase your income for example.

However, money can be used for amazing things and accumulating wealth is both the positive and responsible thing to do. What’s one thing you were told as a child or that you tell yourself now that could be impacting your financial success? Challenge this, and learn to think about how money can improve your wellbeing.

Action 4: Find Your Goldilocks Saving Zone

I realise looking back over the last few years, that I have tended to save around 20-30% of my net income. Too little and I would feel wasteful and a little guilty. Too much and i’d feel cheap and like I was cutting back on too much. To save even more based on my income I would have to stop doing things I enjoy like travel.

Therefore I think it’s important for your wellbeing, to test out what your comfort zone in terms of saving is. When I was focusing on trying to save too much, it made me unhappy, I felt restricted and guilty for spending my money. As I started to understand more about how much money I could realistically save per month and once I accepted this I felt much more comfortable spending money.

Action 5: Find A Savings Style That Suits You

Some people prefer to budget to zero and some people enjoy the process of frugality and cutting costs down to the penny. By contrast, others don’t want to deal with it at all and if you are one of these people, reverse budgeting is the process for you.

Reverse budgeting is in essence, working out how much you can and need to save, making those figures automatic and being able to spend the remaining amount as you want. Reverse budgeting works because it focuses on saving, and you can’t spend what you don’t have. Increase the amount you save and you are forced to make decisions and prioritise how you spend to a greater extent.

This is how to do it:
  1. Find your starting point by creating a budget which forecasts on average how much you can save each month.
  2. Once you have identified how much you can realistically save, you can then automate your entire financial structure, by setting up direct debits to your savings and investment accounts, from your current account where your salary gets sent to.
  3. Align this figure with your savings goal and come up with a figure that also allows you to live a good life, whilst saving a good amount of money.
  4. Set-up direct debits for your money to go into a separate account to pay for things like bills and rent.
  5. The remaining money in your initial account is the money that you have to spend on discretionary items and activities.

I would say that it’s important to track your spending at first, but once you create stable financial patterns you don’t need to continue tracking your expenses. If you can predict your spending and savings to a margin of error, then this will ensure that you can save to the degree covered in action 4.

Action: 6: Negotiate What You Can Do To Get The Big Wins

It’s fine to optimise and focus on the minor details of your spending, it all adds up. However, you should focus on the big wins, for example in the past I’ve managed to negotiate over 50% off the original price of Sky TV (although I later decided to cancel altogether).

Nowadays a strong business model for businesses is to get you to set-up a recurring monthly payment, which becomes part of habitual spending patterns. However, this can add up to a large cost you aren’t even aware of.

Companies will rely on you falling to the default of not cancelling or negotiating once the new customer offer expires. Many people won’t re-negotiate their TV subscription, and this can result in a price increase of over 50% after the first year. People’s default behaviour means they will happily pay this because they don’t think they are in a position to negotiate.

So go through all your monthly payments and look for opportunities to switch providers or negotiate: gas and electric, broadband, phone contract, tv/media bundle. You can use tools such as Compare The Market or pages on Money Saving Expert to find the best deals.

Action 7: Simply, Automate and Forget

The best thing we can actually do sometimes is to forget about our savings and investments, otherwise, we risk counting down the clock to FI. To do this we need to simplify our financial management systems.

Regardless of if you are saving or investing, it’s crucial to automate these payments so that you are free to live your life unrestricted by thinking about your finances too much. You don’t want to have to think about what you are giving up to save and invest. How nice would it be to wake up in 10 years time and realise you have 20k saved?.

Just as important, we need to not be checking our investment portfolio all the time, as investing is a volatile process. You don’t want to review your finances only to feel you’ve gone backwards in your trajectory to FI because there has been a stock market correction.

Final Thoughts On Achieving Financial Independence

Financial independence is a significant challenge, but an attainable and necessary goal. Starting your journey to financial freedom can provide you with many insights about what you value and actually enjoy. This is because you have to understand why you want to accomplish FI and what things you have to cut back on to get there.

This is even more important for people on regular incomes, who may be tempted to cut back to borderline necessities. In my opinion, this isn’t necessary, practical or achievable. What is achievable are the following steps:

  1. Find Your Why
  2. Find What You Enjoy; Spend Lavishly On It
  3. Challenge Your Money Script
  4. Find Your Goldilocks Saving Zone
  5. Find A Savings Style That Suits You
  6. Earn More & Negotiate What You Can
  7. Simply, Automate And Forget

You might be looking for something to drive up your motivation to do the above or keep you on track if you feel like you’ve done them already. There are three things, in particular,can be a real amplifier when it comes to motivation and achieving my goals.

They’re the type of things that can really kick start a day, especially when you’re feeling like you can’t be bothered or you still have so far to go. Find out what these three things are and start using them daily.