I’m often asked how I achieved financial independence.
What I’ve observed in the contenders is a tendency to make the simple more complex and the (really) complicated less so.
If you’re looking for financial independence with a passive strategy based on market indexation through ETFs, then :
The technical aspect is simple.
The psychological aspect is complicated.
So here are the 10 mistakes to avoid if you want to achieve financial independence (and where to focus instead).
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1/ I have to live a very frugal life to become financially independent
Many take this excuse.
I don’t think we must live very frugally (unless we want to 🙂 ).
On the other hand, I think we have to live consciously.
With more emphasis on experiences than materials.
You don’t have to count every penny, but you don’t have to weigh yourself down materially either.
How to better manage my budget? Don’t live on a budget, live on your frame.
2/ I have to constantly hunt for bargains to become financially independent
- The best broker,
- The best bank,
- The best insurance
Our energy is finished. The savings we can make are limited.
Our earning potential is not.
Once you’ve optimized your major expenses (home, healthcare, transport, broker). Change costs you time, stress, and energy.
Invest this strength in your ability to earn more.
You’ll move faster towards financial independence and enjoy yourself more.
3/ FIRE and the 25 times
Purists of financial independence take as their reference the “Trinity study”.
This means having 25 times your annual expenses invested.
With this, you should be able to extract 4% of your capital annually and last for the rest of your life.
But financial independence may mean something completely different to you .
Perhaps you need two years (only) of expenses to :
- Testing and launching a new business
- Traveling around the world with your children
- Try a career change
Financial independence is not a project. It’s your project. Take the time to define it.
4/ I need to become a financial expert to become financially independent
If you want to become a trader, investing in crypto, learning (a lot) is crucial.
But if a passive market-indexing approach convinces you. You only need to understand a few basics.
But you must be clear:
- On your direction (your investment strategy)
- Learn to manage your emotions. Markets will fall violently and rise slowly. You need to know in advance what you will do in those moments.
- Confidence: everyone (including the experts) will be screaming about the world’s end. You need to be confident enough in your strategy to stay the course.
Don’t try to master the market; master yourself…
5/ I’m waiting for it to go up/down before…
Despite all the advice you hear, nobody (really) knows what’s going to happen.
You may be waiting a long time.
If you are clear about your strategy, automate your investments (without emotions). Invest every month, whatever the situation.
You’re not looking to beat the market but to be part of the adventure.
You can replay everything but the market. Are you ready to enter it?
6/ I must seize every opportunity to become financially independent.
Cryptos, gold, commodities, specific stocks…
It requires research and knowledge.
If this is your passion and you like to add risk, then maybe…
But to succeed passively, you don’t need that.
You need to work on your consistency muscle.
It’s less shiny, sometimes boring, but (often) more effective.
Can you afford not to be rich?
7/ I must be financially independent by this date…
Who said that?
Why?
Aren’t you in the cultural script?
“Midlife crisis happens when the cultural scripts end but we fail to write a new story for ourselves”
—Donald Miller
For most of us, financial independence is a long, long adventure.
So let’s enjoy the journey. And let’s make the most of every moment.
And by the way, you’ll be faced with another adventure when you get there.
To live it.
What to do with all your time?
How can you make yourself useful and have fun at the same time?
So many normal questions at the dawn of a new life.
8/ I must have…
- 25 times my expenses. No, more like 33 times to be on the safe side.
- Anticipating my children’s higher education ( who are 3 years old today 😀 )
Inflation, your lifespan, what the markets will give back.
All these variables are uncertain.
No one can predict them.
So yes, financial independence, like any exciting adventure, isn’t 100% certain.
But is your :
- current job 100% safe?
- business 100% safe?
- health 100% safe?
How to gain confidence and take action: 9 ideas for making your dreams come true
And if you look at all the risks, why not anticipate the opportunities too?
Who says you won’t do anything once you’ve achieved financial independence?
How about creating a small business around one of your passions?
Anticipate. YES.
Look for 100% safety. NO.
You’ll create the other part of the story by living it.
PS: I hadn’t anticipated creating a profitable coaching business in my first year, which could earn me more than my best executive years in the next three years.
9/ When I’m financially independent, I’ll stop working…
I don’t believe in this option.
Many people create financial independence by trying to escape from an activity they no longer enjoy.
But financial independence gives you back your time.
You’ll start investing in your passions.
And with the right frame of mind, you’ll find one that you like so much, you’d do it even if you didn’t get paid.
And strangely enough, that’s where you increase your potential to create value and therefore, money.
But it’s not just about the money.
Finding an activity you love is the best way to live longer and in better shape.
Doubt it?
Listen to the podcast where James Altucher interviews Dr. Gladys McGarey, who has 102. In the end, she talks about her plans for the next ten years 🙂
So are you (still) sure you want to stop?
10/When I’m financially independent, I’ll…
It’s the formula for unhappiness.
The book Die with Zero by Bill Perkins explains it well.
There are things we dream of doing now that we won’t be able to do later.
You’re less likely to go under 4 hours in a marathon at 60 than at 40.
Don’t wait until you’re there to live out your desires.
Live your dreams and move towards financial independence, even if it takes a little longer.
Conclusion.
As is often the case, we spend too much time on parameters we can’t control (the right time to invest) and not enough time on those we can influence. ( our emotions, our strategy…)
Financial independence offers unique freedom. It’s an adventure I highly recommend.
But there’s nothing worth putting your current life on hold for a potential (better) future.
Pursuing financial independence will take you out of your comfort zone.
You’ll try, fail, and keep going.
That’s what’s worth living for.
Enjoy your trip.
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PS: Whenever you’re ready, here are 2 more ways I can help you accelerate your growth through coaching:
- You’re ambitious: you’ve already achieved a lot. And you intend to continue. But this time, you want to do it while enjoying the important things in your life. Curious? Click here.
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