The No. 1 Tip to Accelerate Your Financial Independence Day

What’s that tip?

Treat every penny you earn as if it were a critical part of your financial plan.

By making everyday financial priority calls with that perspective in mind, you can build a plan that accelerates the arrival of your financial independence day.

Time is money

• Think of your spending in terms of buckets of time• Past – Debts on stuff you no longer have or use• Present – Current living expenses• Future – Financial goals• Stuff happens – Emergency and other unexpected spending

• Within each time bucket, rank your priorities• Must have – Absolutely critical for sustaining your life• Like to have – Things that make your life worth living• Can live without – Everything else you’re spending money on

Where do your expenses fit?• Every expense fits somewhere in this grid• Key to speeding your journey to financial independence:

Figure out how to use less of your money on the red ends of those arrows, so more can go towards the green ends

Getting there faster: Cut the tail• Red: “Low Hanging Fruit” – easy choice to stop spending here• Orange: “Already Committed” – renegotiate terms, accelerate payback if

appropriate, and stop making new commitments that create spending here• Purple: “Your Money or Your Time” – Life is too short to not have any fun, but

understand that the money you spend here isn’t going towards your “must haves”• Green: “Clear Priorities” – Spend here, but consider how to keep costs down

Fewer buckets: More money for the important ones• Eliminate your “Can Live Without” spending – why spend money on

things that aren’t important to you?• As you pay down debt on past expenses and stop taking on new

debts, you should eventually get to the point where you’re no longer spending money on your past.

Financial independence: Easy as A-B-CYou reach financial independence when:

The money generated by your investments in bucket “A”Covers all your expenses in bucket “B”, andGives you a little extra to put towards refilling bucket “C”

when you have to drain that bucket to cover emergencies

Is that all there is to it?By your priority calls, each expense you have other than those in buckets A, B, and C is either an optional one or one that’s paying down a debt on something you no longer have or use.

If you want more out of life, you can save/invest more to fund the purple buckets, but that’s your choice, not your obligation.

The most critical part – controlling your costs• Understand what’s really important – keep your costs low• By the “4% Rule”, you need 300 times

your average monthly expenses invested in your nest egg for it to reliably throw off enough to cover your costs.

• Each $1 you can cut from your daily expenses represents about $9,000 you don’t need to have in your nest egg

• Know what expenses stop – and what replaces them• Your mortgage, the costs of raising your kids, and the costs of

working typically will stop at some point.• As you age, however, your health care costs typically increase,

and you’ll likely find yourself needing to hire out services you may once have been able to perform on your own.

Why this matters to youLife is too short to spend your time on things that are not important to you.

The stronger your financial focus on the things that matter to you, the smaller the portion of your time that ultimately gets obligated to cover the expenses of the things that don’t.

The sooner you reach financial independence, the sooner you gain the ability to focus more of your incredibly precious and limited time on the things that really matter to you.

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