The Path to Financial Independence

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This is an excerpt from the book, The Heart of Simple Living:  7 Paths to a Better Life (ISBN 978-1-4402-0451-7) by Wanda Urbanska, host of Simple Living With Wanda Urbanska, seen on PBS stations nationwide.  Published by and © Krause Publications.  The book will be available in May.

Old proverb: “Live frugally.  Save liberally.  Retire debt as fast as you can.”

These words of wisdom represent the first, most basic path to the good life. It’s hard to live well when you’re worried about paying your bills or knowing where your next meal or mortgage payment is coming from.

By the same token, seeking the good life through the accumulation of wealth alone can actually undermine your future well-being.  Once you temper your material desires and adopt a frugal mind-set and sensible approach to money management, saving will become second nature. The money you set aside will help retire debt and build security.

Many Americans have it backwards. Too many of us spend out our dreams in our youth (think extravagant weddings, late-model cars, fancy vacations, and state-of-the art electronics). Sometimes the young lovebirds are divorced before the wedding is paid off, and may be forced into penury in old age.  

Much better to reverse this order: Live modestly and sensibly while young — when youth is a priceless privilege — and salt away your money for old age when it will matter more.

When it comes to money, use fiscal restraint, have sensible spending habits and make conservative money management decisions.  Dream big, but be sure you can afford to pay for the ballet slippers.

So after the Great Recession of 2008, when a friend pronounced that everyone he knew was worth half of what they had been 18 months, I often reflect on the philosophy of my niece, Teresa Miriam Van Hoy, who is not yet old but no longer young.

I recall the tremendous energy she expended in her salad days back in the 1980s to save money for her later years.

“I may not be rich,” she told me back then, when she was in her 20s, “but I’m resourceful.”

Who wouldn’t be impressed with the sum she managed to amass in just a few short years working as a foreign language teacher at a private school in Connecticut?  It came to a staggering $90,000!

Teresa, who taught French and Spanish while putting her husband through graduate school, used every resource at her disposal to feather their nest egg.  In addition to her full-time teaching job, she tutored and baby-sat for students, house-sat for their families when they were away, and furnished their own small apartment with their cast-offs.  What she couldn’t use, she unloaded at tag sales.  For a time, she even waitressed on weekends.

Today, 20 years later, she and husband, Roberto, are both tenured university professors in San Antonio, Texas with two teenage sons and a small home that’s long since been paid for.

While frugality remains part of her core identity, today Teresa loosens her billfold a bit more often.  “I’m happy to be living a moment where I don’t have to be so Spartan,” she says.

My own prescription for the good life involves rethinking work, housing, food choices, wardrobe, cleaning and community.  It asks you to do the hard thinking about, and advance planning, for your daily life and rituals, your annual celebrations and rites of passage. And, finally, it involves connecting with community in ways that add value to your life, health, and net worth.

All of these important paths to the good life involve the management of money: acquiring and dispensing it, as well as saving and investing it.  

The fundamental challenge facing you is: How can you — like Teresa Van Hoy — set aside more greenbacks so you can retire your debt as quickly as possible, build your own nest egg and get on with the business of the good life?

The first and most important step on the path to financial independence involves making a mental transformation, re-visioning the person you are in relation to your spending.

It involves revising your definition of success to be based on financial security and solvency rather than some high-flying appearance of affluence.  It involves a degree of restraint, even sacrifice.  If the recent downturn taught us anything, it is that the person driving the paid-for car, or living in the low-mortgage payment home, is on more solid
footing than the one in the luxury SUV for which the resale market has dried up, or living in the “McMansion” that is repossessed by the bank.

Claiming a thriftier self involves shutting down those little voices that egg on mindless consumption, urging you to treat yourself to that cappuccino or designer handbag, to go for the bigger house, the more luxurious handbag, and even the most expensive item on the menu.

These voices—which, surprise, resemble so much of the commercial messaging to which you’ve been exposed—are like termites eating away at your financial foundation. In order to create a new self, you must construct a new set of voices and values to replace the ones with which you previously lived.  

When stifling the urge to splurge, remind yourself about the greater goal for which you are saving your money: financial independence so you can live the life you want; saving for your daughter’s college education; investing in your home or your retirement. Even giving to such worthwhile causes as charity is a legitimate rationale for a new, higher set of values.

Following are a few of my strategies that can work for you as well in establishing financial independence:

•  Pay your credit card(s) in full every month.  

Make this a habit.  If you still have a way to go with large credit-card balances you owe, put yourself on an immediate “pay-with-cash-only” diet until you have paid off all of your credit cards completely.

If you cannot manage the discipline of this, try this zany trick. 

Insert your credit card(s) into a zip-lock bag full of water and stow in the freezer.  I’m not kidding. This technique will quite literally put a freeze on your spending.  If your credit card is encased in ice, you must make a conscious decision in advance to use it  by thawing it out the night before. (If you try sticking it in the microwave, the plastic will melt, which might not be a bad thing for some.)

•  Pay your bills as quickly as you can.  

I derive pleasure from paying bills quickly. The minute a bill arrives in my mailbox, I’m raring to write the check and send it on.  If you pay immediately, you eliminate the danger of accruing late fees.  You eliminate the danger of forgetting.  

What’s more, I have come to believe that paying bills early helps keep money moving, helps create a flow of money energy into your life that somehow attracts more money to you.  Also, referencing what’s left in your checkbook, after you’ve written out your bills, serves to make you feel poorer rather than richer, hence less likely to spend.

Remember a basic lesson when trying to adopt the frugality mentality is to reinforce a feeling of having less — less is more.

•  Carefully consider any purchases that involve recurring charges.

When I began fund-raising for the Simple Living television series, I met with Jim Frye, a wise and generous banker in Pilot Mountain, N.C.  One of the points he made then that has always stuck with me is this:  On your way to solvency and wealth, you need to closely scrutinize any and every recurring charge, no matter how small.

“I’d much rather give you a one-time gift of $3,000 than sign onto giving you $25 a month for an indefinite period,” he told me.  

I’ve never forgotten that wise counsel. It’s easy to lose sight of the smaller charges, but they add up in a hurry, and if you don’t watch it, they’ll get away from you.

•  Delay purchases.

This one is one of the most fundamental concepts for people to employ when traveling the path to frugality. If you want something, almost always the best strategy is to put it off.  Delay spending.  

If you do curb the impulse to buy something you want, one of several things will happen:

1. You may forget all about it. In this case, you discover you didn’t really want (or need) it that much to begin with and you’ve saved yourself the money of buying it.

2. You continue to fantasize about it, developing new scenarios in your mind about how owning this thing will enhance your life.  If this desire persists over time and you can figure out how to pay for it without borrowing to do so, go for it!

3. You’ve delayed buying it but when you go to purchase it, guess what?  It’s gone. There’s a silver lining to this scenario, too.  The cosmic forces in the universe have conspired to make the decision for you. You can live without it. And, you’ve saved money!

•   Rule out recreational shopping.

Do you go out shopping when you’re bored, hungry, sad or tired?  Is shopping a habit for you, or your major form of entertainment?  In your journey to frugality, it’s essential that you come to view this habit as dangerous and set out to break its back. In pursuit of frugality, it’s out with recreational shopping and in with conscientious shopping.

•  Learn to say “no” to your children and your friends.

Have you ever noticed how people are always trying to tell you how to spend your hard-earned money?  If it’s not your child wanting you to buy him a new computer game, it’s your friend inviting you to a household products or specialty jewelry party, or out for a night on the town at a pricey restaurant.  Just learn to say no.

•  Celebrate small infusions of cash.

Find and identify those places in your own life where you can hold the line on spending. Visiting your favorite library is one of the best. Borrow books and investigate the other free resources that can help you earn cash. Rely on the expertise of the librarian to help you learn about the best online sites that encourage thrift and wise spending. Then give yourself a pat on the back.

I’ve been preaching the gospel of financial prudence for two decades now, telling people to guard against throwing money at problems that money cannot solve.  Learn the fundamental lessons of frugality and wise money management that will carry you through the rest of your life. The lesson is clear. Once you adopt a frugal mind-set, along with a sensible approach to money management, it will bring consciousness to your spending decisions.  This way, saving will become second nature.  The money you set aside will help retire debt and build security.  You will be, quite literally, setting yourself up for the time of your life — the good life!

More Resources

Has Wanda’s article inspired you to work to improve your financial situation? Visit your local library for these and similar books, and watch for the publication of Heart of Simple Living:  7 Paths to a Better Life in May.

Simple Living: One Couple’s Search for a Better Life
by Frank Levering and Wanda Urbanska
One of Urbanska’s previous books, written with her husband, about how they left L.A. to move to southwestern Virginia to work in Levering’s parent’s orchards, continue their literary careers, and learn to appreciate life’s essentials while chipping away at the habits of consumption and materialism.

In Cheap We Trust: The Story of a Misunderstood American Virtue 
by Lauren Weber
Weber gives a history of frugality in this country, from Ben Franklin’s Poor Richard’s Almanack to the material sacrifices made during World War II. She also chronicles modern-day adventures in low-cost living, such as a man who embargoes purchases for 12 months, and a woman who lives as a freegan.

The Economic Naturalist’s Field Guide: Common Sense Principles for Troubled Times 
by Robert H. Frank
A witty collection of essays that connect behavioral economics—explaining why we do what we do in a business sense—to government policy.

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