The Secret to Achieving Financial Independence

The secret to attaining financial independence is to change who you are as a person.  It is the process of constantly releasing new versions (1.5.3) of who we are and how we live. Wow. That was a bit profound (and cryptic).  But HOW do we change who we are?

Solution: the power of habits.

How do habits work? 

Every habit has 3 components: a queue (trigger), routine (behavior) and the reward.

Most of us focus on the routine when we want to change a habit (“I am going to stop eating food after 8PM so I can lose weight”). This will almost always ensure failure.

It turns out, the magic happens when we focus on the queue and the reward!!

Here is an example of a sloppy middleclass habit: queue = I am bored. Routine = I watch TV. Reward = really inefficient form of entertainment (most of the time). By-the-way, does anyone else think it is insane that the average person (U.S.) will spend 9 YEARS watching TV in their lifetime?!

Here is an example of a financially independent person’s habit: queue = I wake up. Routine = I run outside in the beautiful outdoors! Reward = endorphin crazed happiness (not being bored).  Here are just a few additional rewards:

  • Physical fitness
  • Physiological health
  • Mental health
  • Decrease in personal expenses (increase in net worth)
    • Decrease in healthcare costs
    • Decrease in consumption related costs

One of the most fascinating truths about habits is that they are not located in the part of the brain where we have CONSCIOUS THOUGHT. In other words, we don’t think habits. They just happen. The research says that > 40-45% of everything we do in a given day is a habit.

THE MOST POWERFUL action anyone can take in their quest toward financial independence is learning the process of changing personal habits and using this knowledge to program our brains with habits that automatically lead to wealth creation.

You will find that one of the most difficult parts of changing habits will be (what feels like) the personal rejection of your new behaviors from your current relationships. Some people in your life really like who you are as a person and they really would rather you not change.

For example, if you have friends and family that love to overeat (routine) as a form of socialization (reward), some of these people won’t love the idea that you are changing your habits in order to lose weight. Most of the time they aren’t doing this maliciously, they just don’t like change. Their basal ganglia (where our habits reside in the brain) is programmed a different want. They don’t appreciate your deviation from “normal”.

But you will learn to love change!! Because, it turns out, embracing change is one of the core habits FI people have programmed into their minds (habit)!!

This may require that you replace a few of those friends with people who will encourage, uplift and invest in who you are becoming (as you do the same for them)!!

What habits should we change?

You have probably heard of the Pareto Principle (80-20) rule. 80% of our results will come from 20% of our efforts when we start to learn how to stop being broke all the time and begin learning how to become wealthy and have excellent relationships. Invest heavily in the 20%.

Destroy these old habits:

  • The habit of constant consumption/consumerism
    • This habit often leads to debt
  • The habit of minimal effort
    • This habit is often associated with low income over long periods of time (years)
    • This habit leads people to pay (significantly) more for products and services than necessary
  • The habit of pride
    • This habit often leads to avoiding work that is “beneath you” which can be a very expensive habit
    • This habit can lead to a set of behaviors known as, “Keeping up with the Joneses
  • The habit of negativity and making excuses
    • This habit often limits career potential and systematically depreciates relationships

Program your mind (basal ganglia) with these new shiny automatic habits:

  • The habit of independent thought and curiosity
  • The habit of learning (and learning how to learn)
  • The habit of self-reliance
  • The habit of reducing expenses (that don’t provide disproportionate levels of value to your life)
  • The habit of increasing your income
  • The habit of avoiding unnecessary consumption/consumerism
  • The habit of negotiating
  • The habit of confidence
  • The habit of optimism
  • The habit of working hard
  • The habit of working smart
  • The habit of serving others with excellence
  • The habit of loving work
  • The habit of finding work you love

So am I saying that there are people making 50K a year that could increase their income to 100K a year by simply changing their habits? Yes… That is exactly what I am saying :-)

How would I possibly know this is could be true?

I conducted a 5 year experiment in my own life that took my income from 38K to > 200K right smack in the middle of the “Great Recession”. Trust me, if I can do it, anyone can do it. It does require overwriting old habits with new more powerful ones.

A Story – Changing Habits

5 years ago, I had a negative net worth (-$80,000) that consisted of student loans, a car loan, a personal loan and a mortgage.

I distinctly remember staring out the back window of my newly financed (no-money-down) house wondering what the heck I had just done!!  I was enormously stressed out and anxious all the time…  I was taking home $1800 a month in those days. My new house payment was > 40% of my take home pay each month. There was no margin for error.

Those early days were tough.  My future wife and I argued a lot about what we would do with our money each month. We were moving in opposite directions. We began learning how to program our brains with the habit of, “working with your spouse”.

Our net worth has since climbed from -$80,000 to over $225,000 (a swing of over $300,000) in the last 5 years. How could we possibly have achieved this?

We learned the habits required to (enjoyably) keep our personal expenses around 25-35K a year.

We learned the behaviors associated with increasing our income (“certificates of appreciate”!!)

We learned the habits required to become financially independent.

We learned how to buy our time.

We are enjoying the journey of learning how to be content and find deep levels of peace and happiness in our lives. Yes – even contentment and happiness are habits!!! We are in the process of learning what those habits are as well.

Bonus Secret

I played a little trick with the title of this post. The reality is, the insights we unpacked around changing and upgrading habits are really how we attain ANYTHING worth having (including buying our time with financial independence).

  • Do you want to be excellent in your career? Find a mentor who is successful and start modeling their behavior!
  • Do you want an excellent marriage? Find a couple who have a great marriage and take them out for coffee.
  • Do you want to increase the % of income you save every month? Find someone who is a happy-as-can-be super saver and figure out what they are doing, and copy the formula!
  • Do you want to learn how to exude confidence and give a great presentation? You might consider changing your posture! Fake it ‘til you become it (excellent research).

Identifying and systematically upgrading our habits is one of the most powerful ways to change our lives for the better!!

One thought on “The Secret to Achieving Financial Independence

  1. Pingback: They Buy Time | 63% Savings Rate – December 2013 – Dollars Go to Work!!!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>