Simplicity leads to wealth

Posted by Don on October 22, 2009

A lot of people think you need to be a high income earner to be financially independent, but I contend that financial independence is a state of mind.  We have all heard about multi millionaires who have ended up bankrupt and also heard the stories about the couple who earns $50,000 per year and after 25 years they look up and have over a million dollars saved.

John McAfee who was once worth over $100 million is the latest casualty of the recession.  He is now broke because all of his money was tied up in high end real estate.  How about Hank Greenberg the former head of AIG.  He was forced out of the company he created and because someone else drove it into the ground a large portion of his net worth was gone.

The question everyday people want to know is right now in this scary time how can we become financially independent.  Many people began taking steps last year at the beginning of the recession and began saving more of their money.  The savings rate went from negative to approximately 5% in nine months.  Americans finally began prioritizing their spending on the things that were important.

Frugality is a state of mind, and attitude that you will control where your money goes.  As someone whose household income has been cut in half due to job loss we had to make some tough decisions.  The first one was we began living more simply.  We now budget every month and prioritize where our money goes.

If you write down your financial priorities and stick to them you will be amazed how far you have come in 3 months.  Go to the library instead of going to the bookstore.  Create a menu for dinner every day at the beginning of the month which allows you to shop and prepare meals at home.  The point is to ask yourself before you go buy anything new is do you really NEED it?  Our TV is 11 years old, but works fine.  One of our cars is 9 years old with 145,000 miles on it, but it runs well and is a GM.

Anyone can become financially independent by simplifying their life by following some basic steps.  Is it fun?  Not at first, but it is amazing how it will become a habit and you will find yourself searching out frugal options.

Good sources of information

Investing

Strong 2009 Market Returns So Far: Time To Rebalance?

Best Dividend Picks for 2009, Q3.

5 stages of Investing Englightenment.

Finance Information

Carnival of Personal Finance