What exactly does it mean? Well, Webster's Dictionary defines the terms
Pertaining to the science of managing
Freedom from assistance by others.
So financial independence means the ability to
manage your money in such a way that you have
sufficient funds to live your chosen lifestyle without
assistance from others. In other words, enough
money to meet all your needs whether you work or
not, because a job is really assistance from someone
else — your employer.
Notice that this definition doesn't mention
amounts of money or the symbols of having money
that we often attach to financial independence. To
some people financial independence might mean yachts, mansions, and expensive
cars; while to others it might simply
mean never having to worry about
bills again — knowing they will
always have a comfortable home and
the time and resources to enjoy their
interests and hobbies. For many, not
having to work a second job, or maybe
just having sufficient income
so their spouse could stay
home with the children,
would constitute financial
What does financial independence
mean to you? What
would it mean to your life?
How would your days and
nights be better if you knew
you had the resources to meet
all your financial obligations
for the rest of your life?
The easiest way to begin framing
this picture in your mind is to think of
a typical day. Not a special day, where
you do something you might only do
occasionally, but an average day, one
that would be filled only with what
you'd be doing most days once you've
achieved financial independence.
- What time would you wake up?
- Would you be awakened by an alarm clock or by your body's clock?
- Once you arose, what would you do first? Second?
- When and what would you eat?
- What would be the main activity of your day?
- How would you spend the evening?
- What would determine when you went to bed?
- What would your home look like?
- What kind of vehicles would be a part of this typical day?
Spend a few moments in that daydream:
in a typical day in your financially
Now ... are you really ready? Are
you ready to make the changes to your
present life that will allow you to
achieve that kind of independence? After all, if no changes were necessary
for you to achieve financial independence,
you'd already be there.
If honesty forces you to admit your
prospects for true financial independence
are cloudy at best, then let's get
on with figuring out how to blow those
Ralph Waldo Emerson once said,
"What lies behind us and what lies
before us are small matters compared
to what lies within us." What you
have to determine is whether financial
independence lies within you.
That's right ... you either have what
it takes or you don't. You're either
made of the stuff that yearns for selfdirection
and self-support or you're
not. Only you can examine the true
you and answer this challenge.
In the late '80s I had to take the
same inventory of myself. I had a
growing business and was making
great money. I had a beautiful house,
fancy cars, and a private plane. Yet
like most Americans, I was living up to
the maximum of my income — and
with the help of Uncle Visa and Aunt
MasterCard, a little beyond it.
When I stared it right in the face, I
knew my life was a house of cards and
that when my working years ran out,
I'd be in a real mess. Unfortunately,
circumstances didn't even allow me
that much time. My business was
reselling another company's product,
and when that company suddenly
went out of business, it pulled us
down with it.
My personal income dropped from
really good to zero, almost overnight.
That began the worst two years of my
life. Panic-filled days, sleepless nights,
relationship stresses, and the seemingly
endless scramble to save my home
and find another income source.
That nightmarish experience caused
me to seek the true path to financial
security and freedom. Not the hype
baloney you read or hear from the
pushers of what I call "The Solution
Lies." Those are the people who tell
you the answer to your problem is to
make zillions of dollars — and you can
do that by just buying their magical
I knew there had to be a realistic
system for achieving true financial
independence. And I knew that such a
system would have rules. Rules that
are laws, like gravity.
Well, I found those rules. Once I
did, the money map of my life sharpened
from an indistinguishable maze
to a clear route to my goal. I developed
a plan for my life based on these rules
and road signs, and I put that plan into
One year later, my wife and I had all
of our bills other than the house paid
off. Less than four years after that, the
26-year balance on the house
mortgage was eliminated.
And less than five years after
that, we began living 100 percent
off the proceeds from our
investments. Working is now
The incredible thing is that
we accomplished all of this
with the same amount of
money we had been bringing
home each month all along —
our regular paychecks. If we
had added more money into the system,
we could have been out of debt
faster and ended up with even more
In the process, I discovered that
many of the central financial principles
most people operate under are simply
not true. I call these the Myths of
Financial Independence. Disabusing
yourself of these lies is an absolutely
critical step on the road to wealth, freedom,
and real peace of mind. I invite
you to take that step right now:
You can use money the same way everyone around you uses it — and still
end up financially independent.
The United States Department of
Health and Human Services regularly
conducts an extensive study of what
happens to the average worker in this
country by the time he or she reaches
conventional retirement age (U.S. Department of Health and Human Services study). The
pitiful results show that fully 95 percent
of the people in this country DO
NOT achieve financial independence
by age 65, but rather they end up
DEPENDENT on the government, or
charity, or their families, or they have
to keep working until they die. ninety-
five percent. That's almost everybody!
These are working people just like
you and me, people who went through
their lives believing the myth that if
they were just good employees and
good consumers, they would be
rewarded in the end. Instead, most of
them end up struggling to survive on a Social Security check and/or a pitifully
small pension. It isn't pretty. If you
know anyone living on Social
Security, visit with that person for a
day and see if that's how you want to
spend the "Golden Years" of your life.
The truth is inescapable. If you're
using money like most Americans —
buying things on credit, making
monthly payments, trying to put away
a few bucks each month, etc. — you're
doomed to end up the same way they
The responsible use of credit can enhance your financial well-being.
This may be the single most dangerous
lie told to the American consumer.
Only the merchants and the
lenders benefit from your using credit.
You DO NOT! All credit does for you
is raise the price of the things you buy.
And if you pay more for everything,
over the years you'll be able to buy
independence forever. You have to
put in the most effort upfront. Then
after a while, you can relax into a wonderful
lifestyle and spend a lot less time
and effort maintaining that lifestyle and
income ... giving you time for your
loved ones, hobbies, and maybe even
dreams you have long since let go.
You must develop and maintain a long-term view.
If you hear yourself saying, "I really
should pay off my debts and start
building my financial independence
fund, but there are a few more things I
want first," translate that to, "I want to
continue wasting my life, taking no
action to build a better future, and I'll
risk the consequences later."
If you live only for today's gratification
and never really begin building a
financially secure future — my estimate
is that it'll cost you about $423 in lost
future wealth every day you wait!
It takes more than a few weeks to build real financial independence.
My debt-freedom plan took just four
years and seven months, and five years
later I could live off my investments
alone. That may seem pretty fast to
you. But it did not happen overnight. I
didn't find the goose that lays the golden
egg. I just rerouted the money
already moving through my life into a
plan that allowed it to accumulate for
my family's benefit, rather than the
benefit of my creditors.
Beware of people telling you it can be done overnight. That's the lack of
wisdom that feeds lotteries ... and lotteries
are just a tax on people who
don't understand statistics.
Getting rich does take some time.
Accept that fact and you'll enjoy life
more, while you get rich.
Financial independence may not be
possible by following the path you've
been on up until today. But I am living
proof that IT IS POSSIBLE once you
shed the myths, embrace the realities,
and really commit yourself to a sound,
structured plan for achieving your
Just think of what that kind of independence
could mean to your life. No
more pressure from bills. No risk of
losing your home, car, or anything
FEWER things than people making the
same income as you who pay cash
instead of using credit. So using credit
will actually diminish your
lifestyle, not enhance it. The people
using cash will be able to afford a better
lifestyle than you.
Consider this: The only true measure
of wealth is net worth — how
much you own MINUS how much you
owe. So owing money on assets you
supposedly "own," like your house or
car, reduces your net worth, thereby
reducing your wealth. The only way to
really achieve true financial independence
is to own everything in your life
and owe nothing. That's real wealth.
Pay yourself first.
The false belief here is that you can
carry a load of debt and otherwise use
money like everyone else around you,
as long as you first put a little aside in
some kind of savings or investment
The truth is that you should PAY
ALL OF YOUR DEBTS OFF FIRST,
and only then begin paying yourself.
It's the only way to dramatically
accelerate your journey to financial
If you think about this, it just makes
sense. When you pay off your debts
first, you then need less to live on each
month because you're only paying for
food, utilities, taxes, insurance, and
any other minor expenses, leaving you
with a lot of savable money each
month. So it will only take months
instead of years to save up a sufficient
emergency fund. After that, your
retirement investments will build rapidly
because you're funding them at a
high level each month.
You can get out of debt by putting a little extra on each bill each month.
To effectively eliminate your debts,
you have to use the military principle
of "massing of forces." This means you
concentrate all available resources on
ONE debt at a time.
This way, you pay the target debt off quickly, thereby recovering its monthly
payment, which you will then add to the amount you'll mass against the
second debt, and so on.
A quick rule of thumb would be to
pay off your debts in order of their outstanding
balances, working from the
smallest balance debt to the largest.
By doing this, the amount you have
available to "invest" in your debts will
actually accelerate after each debt is
paid off and you recover what used to
be its monthly payment.
Targeting debts by interest rate is
not generally the best strategy.
You need to learn how to "manage" credit.
You need to learn how to ELIMINATE
credit from your life. The idea of
"managing credit" is like "managing a
drug addiction." There's no such thing
as a good way to "manage" something
that's damaging to your well-being.
Once you're debt-free, you'll never
need credit again. If you want to move
up to a better house, you'll just sell the
one you own free and clear — maybe
take a little additional money out of
your swelling investment account —
and buy your new house with cash.
That's how it works when you eliminate
debt. When you just manage debt,
you stay in the 95 percent group along
with all the other financial failures.
To be successful, you have to work "smarter not harder."
Everyone I've ever met who has
achieved financial independence will
tell you that — at least in the early
days — you have to work smarter and harder. The price of success must be
paid in full, and it must be paid in
advance. There are no shortcuts.
This is particularly true if you're
going to try to build a business, even a
home-based business, as part of your
financial independence plan. Building
a business takes more work than a job,
at least in the beginning. It also offers
greater rewards than a job, both financial
and emotional. But you should
never be fooled into thinking that
building a significant revenue stream
can be effortless. If you see that kind of
promise in a business's advertising literature,
they are lying to you!
It takes hard work to achieve financial
independence, which is probably
one of the primary reasons why 95
percent of people don't do it.
It takes OPM (other people's money) to make money.
I know from experience that this is
simply not true. I built a three-time Inc.
500 multimillion-dollar-a-year business
starting with less than a $100 investment,
working out of a spare bedroom.
The most dangerous result of this
myth is when borrowers realize too
late that the "other people" you borrowed
the money from expect to be
paid back — WITH INTEREST! Like
most shortcut-to-riches illusions,
using borrowed money to build financial
independence frequently has the
opposite result. It accelerates your
For every person who might succeed
this way, a hundred lose their
shirts ... and the houses those shirts
were hanging in.
Once you've freed yourself from
these misconceptions and outright fabrications,
you will have eliminated the
major obstacles standing between you
and a financially free future. The next
step is to accept and commit yourself
to a few basic, inescapable Realities of
If you're not already financially independent — or well on your
way — you must change your financial behavior to succeed.
There are only two ways you can
leave this article — changed or
resigned. CHOOSE TO CHANGE. It's
really that simple.
You have to be willing to put forth effort.
The only place success comes before
work is in the dictionary. But you don't
have to work hard at achieving financial
else, because you'll own it all. No
more worrying about the financial
implications of life's "what-ifs." Being
able to work if you want to, or not work if you don't want to.
That's true freedom — and you
deserve to be enjoying it.
Learn more about John
Cummuta and his bestselling
Transforming Debt Into Wealth.