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Three Steps to Guaranteed Financial Independence

July 02, 2015 at 12:00 AM

As a nation we set aside one day a year to formally celebrate our independence. When it comes to your money my hope is that you will make every day, not just July 4th, a day where you make conscious decisions that will help you build financial independence: a life where you are in control of your money, and not vice-versa.

My three steps to creating lasting financial independence:

  • Live Within Your Needs But Below Your Means.  At a basic level you of course need to spend money to provide you and your family with food and shelter. But how much you choose to spend on your basic needs is a squishy number dependent on the choices you make. For example, a mortgage lender may tell you that you will qualify for a $250,000 mortgage. But if you can find a great home that meets your family’s needs and it costs $195,000 you will save a lot of money that can be used for other important goals. The $195,000 home fits your needs. 
  • Pay As You Go. I am a big believer in using debit cards, rather than credit cards as much as possible. Ideally, a debit card that is prepaid or that is tied to a checking account where you have declined overdraft coverage. There is no more expensive form of bondage than spending more than you have and paying interest of 15% or more on your credit card.
    • Suze Tip: While I want you to focus on Pay as You Go, I also want you to use one credit card a few times a month, for small purchases you can easily pay off in full when the monthly statement arrives. This is a key to building a strong FICO credit score.
  • Enjoy the Pleasure of Saving as Much as the Pleasure of Spending. There is a natural tendency to view saving as some sort of punishment, or a hard tradeoff, because it reduces the dollars you have today to spend. But that’s just because we have a tendency to live in the here and now. I want you to dig a bit deeper and give equal weight to the future. Saving today for retirement is how you build independence for your future. Setting aside money in an emergency account today is how you will be able to handle the unexpected costs that can derail the unprepared. 
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