Lesson 1: The Financial Independence Formula
There is a formula that nearly all financially independent people know about that the rest of us have been missing out on.
They don’t teach you this formula in grade school, at college, or on the job.
And I’ve yet to seen it explained in a way that accommodates for our busy day to days.
By the end of this lesson you will learn the importance of each part of the financial independence formula.
The formula for financial independence is quite simple. Here it is in a nutshell:
Mindset + making money +saving money + growing money + consistency overtime = Financial Independence
When most people think about growing money, they have a fixed mindset. They say things like:
“I’ve just never been very good with my money.”
“I have so much student loan debt that I think to myself, ‘what’s the point,’ and tend to do nothing about it.”
“My life is so busy that I put my finances on the back burner and say to myself that one day I’ll figure it out.”
“There is so much information that I don’t even know where to start.”
The problem with this kind of mindset is that it stops you from taking any action that could potentially improve your financial situation and the overall feeling of security that financial independence provides.
I will go over mindset in much more detail in the next few lessons.
Unless you’re already financially independent, you need to make money in order to save it and then grow it.
As you’ll see in unit two, depending upon how old you are, you most likely need to make a lot less than you think in order to reach your financial goals.
In unit three you’ll learn all about how to save money. We’ll also go over what to do if you’re in debt.
Saving money is important for three reasons:
It helps you develop the habit of paying yourself first. This is one of the keys to becoming financially independent.
You should always have some extra cash laying around in case of an emergency. This is called your emergency fund.
You need to save money first, in order to grow it.
In unit four you’ll learn all about growing your money.
There are so many ways to grow your money that it’s overwhelming. But the research shows that one of the most effective ways to grow your money is also one of the simplest.
This works out well because when our brains are prompted with complexity, we tend to become paralyzed or pressured into making bad choices. The good news is, that there is a simple solution that is easy to implement. And this solution has the power to change your financial well-being.
Consistency over time
In unit five you’ll learn the final component of the formula: consistency.
Growing your money means consistency in mindset, making, saving, and growing your money over time.
It’s very unlikely that you can become financially independent if you are inconsistent with the habits you need to develop in order to grow your money.
In this last unit, I’ll show you how to create a system that will allow you to start reaching financial independence immediately.
EXERCISE: Journal Time
Use a journal or your word processor of choice, to respond to the following prompts:
What kind of beliefs do you have around money? Where do you think these beliefs came from?
How have your beliefs around money impacted the management of your finances?
In 5 years, where do you want to be financially? How much money do you want to be making, saving, and investing? How about in 10 years? 20 years? 30 years?
In this lesson, you learned a bit about each of the five components of the financial independence formula:
In the rest of Unit 1, you’ll learn how to calculate the amount of money you’ll need to accumulate in order to consider yourself financially independent, as well as the mindset necessary in order to get there.