Updated on 10.15.14

Nine Strategies for Cultivating a Mindset of Financial Independence

Trent Hamm

As I’ve stated many times, Sarah and I have a central goal of financial independence at the earliest possible age. Financial independence, to us, means that the requirement of money in exchange for our work becomes entirely optional, leaving us to choose options for our work based entirely on our own skills and personal joy. Considering our twenties were disastrous from a financial standpoint, we’re aiming to be able to achieve this goal in our mid-forties or so – a decade down the road, if all goes well.

The biggest challenge of adopting such an enormous goal is that the only way to actually achieve it is to change your mindset. That enormous goal needs to underline how you look at the world and the decisions you make.

That can be a difficult transition. When you commit to saving a major portion of your household income each year, you’re choosing to live in a way that’s likely significantly different than how you were raised and also significantly different than how the vast majority of Americans live.

You have to think a little differently – and the only way to do that is to cultivate a different mindset.

Over the last several years, I’ve spent an awful lot of my time cultivating that mindset – unintentionally at first, and then, eventually, with full intention. I’ve read mountains of books on self-improvement, personal finance, and psychology. In the end, I’ve found a handful of practices that really work well in terms of cultivating that kind of mindset.

Spend Time Thinking About What You Want Most from Your Life as a Whole

Every single day, I spend at least a few minutes thinking about what I want from my life. By that, I don’t just mean the rest of the day or tomorrow or the weekend. I think about things like what my children will tell my grandchildren about me or what might be said in my eulogy or the sum total of people I’ve positively impacted during my time on this earth.

Those are big, weighty things and they can be hard to really think about. So much of our future is shrouded in a mist of uncertainty. We often don’t know exactly what our life will be like tomorrow, let alone in five years or in twenty.

What we can think about are principles. When someone describes you in a single sentence at the end of your life, how will they describe you? When you leave this world, will you have left a positive impact on a lot of lives? How will you achieve those things?

When you spend your time thinking about the short term – today, tomorrow, this weekend – it becomes a lot easier to justify expenses. This weekend might be a lot cooler or better if I bought this item or went on this trip.

When you spend your time thinking about the long term – your big objectives over the rest of your life – those expenses start seeming a lot less meaningful. Does a new dress for the party this weekend really matter very much? What really matters is the relationships you build there – and if those relationships don’t matter, why go?

Spend Additional Time Thinking About How Your Daily Choices Work Toward That Life

Still, I’m human. When I’m already in the mindset of thinking about the big patterns in my life, I can’t help but want to relate them to those short-term things – today, tomorrow, this weekend. Sometimes, they can seem unrelated.

What I try to do is think through things that happened in the last few days and the things I intend to do in the near future with those big ideals in mind. I’m going to the store tomorrow. How will my choices there affect those bigger life goals?

I often walk through interactions I’ve had and have and purchasing decisions I have made and will make while trying to keep those big things in mind. I’ll walk through a social interaction I had. Did I actually cultivate a relationship there? If not, why not? I’ll walk through that upcoming trip to the store. What kinds of foods should I buy for my long-term goals? (Healthy ones, ideally at a low cost.) Should I spend my money on incidental things? (No.)

A lot of people do these kinds of mental walkthroughs – I know I’ve always done it, even when I was little. The difference is that I try to shadow those walkthroughs with my lifelong goals. I don’t think about momentary or short-term pleasures when I’m doing this. I try to think about nothing but the long term and how the situation I’m thinking through helps me with my life goals.

Naturally, I don’t always do everything in terms of the long term, but by thinking through these situations, I make a lot more choices and handle a lot more interactions with the eye toward the long term than I once did.

Learn How to Separate Needs and Wants

The vast, vast majority of things in our lives are wants. Because we’re accustomed to an affluent life, we’ve come to believe that an awful lot of things in our lives are needs because we’ve become so used to having a want fulfilled.

When you step back and look at how many wants are fulfilled in our day-to-day lives, it’s impossible not to feel incredibly blessed.

I really like how Jacob Lund Fisker explains this concept in his book Early Retirement Extreme, which I discussed recently. Here’s what he has to say:

Consider, for example, shelter. Here the list of choices may look like this:

1. Sleeping under open air.
2. Sleeping under a tarp, bascha, or hootchie.
3. Living in a tent.
4. Couch surfing.
5. Living in a shack or a cabin.
6. Living in a ship cabin or a truck cab.
7. Living in a car or a boat.
8. Living in an RV.
9. Sharing a room with other people.
10. Having your own room.
11. Sharing an apartment with other people.
12. Having your own apartment.
13. Sharing a home with other people.
14. …

On this scale there is no demarcation of when a need becomes a want. Each step is slightly different and slightly more expensive than the previous step, with no indication of what the bare minimum is, other than having a place to sleep.

I have family members and friends who have lived at level three and four on this list and they’re perfectly functional, wonderful people. I live somewhere around level seventeen. The difference between the two is just the fulfillment of a lot of wants.

Now, I’m not advocating that people live in tents like hermits. That’s not the point. The point is that if you stop and reflect on your life from this perspective, you begin to see the huge number of wants we have fulfilled on a daily basis and how truly rich and wonderful our lives really are.

I have so much. I have a wonderful big house to live in that is shared only with people I dearly love. Why would I want more? I have a dresser full of well-fitting clothes that look reasonably good on me. Why would I want more? I have more board games that I’ll likely ever be able to play to the point that they’re “boring” or “routine.” The same is probably true for books. I eat amazing meals multiple times a day.

My life is amazing. Why do I need to keep throwing money at more and more and more wants?

Spend some time each day reflecting on all of the things that you have in your life that fulfill wants. Make some lists like that list of housing options. Consider the line where you personally differentiate between “need” and “want” and then reflect on where you find yourself. You have so much.

Whenever I think through this, I begin to realize how much money I spend on pure wants that don’t really add anything significant to my life. If I spend money, it either needs to take care of a basic need, take care of someone else I care about, or extend some core value of my life. If I’m not doing one of those three things, the expense feels pretty empty.

Separate Your Desires from the Desires of Others

The most powerful trick that advertisers and marketers use is that they mess with the line between want and need. They pull in peer pressure, the need for self-actualization, the need for love and to be loved, and many other things and use those to convince us that some thing is a need – or much closer to it than you might have thought. They actively try to alter your desires to match what they want, in other words. This doesn’t just happen in advertisements; it occurs in “news” stories, product placements within other programs, and countless other ways.

In a less pernicious way, the people around you do the same thing. When you see someone else feeling pride or happiness, it’s a normal human reaction to want to feel those things as well. When you see what has triggered those feelings, it’s a normal human reaction to desire whatever it is that triggered those feelings. We want to “keep up” with them. We want to feel good like they do. We may even want to “beat” them in some fashion.

The end result of both of these things is an alteration of our own desires. We suddenly desire something we didn’t desire before. A very minor desire is suddenly amplified into a much bigger one. A nonexistent desire can suddenly bubble into something you must have or must experience.

There are a lot of ways to deal with this and I’m going to mention a few more below, but one very useful strategy is to simply think about your current strong “wants” and ask yourself why you want them. Think about the one or two things you want most right now and ask why you want those items. Then go further – what about that item do you not want? The price tag? Some attribute of the item?

The more you do this, the more you get in tune with what you personally want, separate from others. Often, that list of wants is much smaller, meaning you’re less likely to spend money and time on things that aren’t deeply meaningful to you, and much clearer, meaning the things you do spend money on will have deeper meaning to you.

Research All of Your Purchases

Whenever you make a major purchase – and I define “major” as anything over $20 or so – it’s well worth spending time in advance of the purchase researching that purchase.

No matter what the purchase is, I’ll try to learn more about the specific product I’m buying as well as any significant competitors. I’ll look for multiple comparative reviews that puts the various options side by side and runs them through their paces. Once I’m sure of the one or two or three options I’d be willing to buy, I spend time shopping around for the best price I can find both online and offline.

This can be a rabbit hole of time, of course. I usually break it up over several short sessions. I’ll find some comparative reviews and read them during one session. I’ll find some more during another one. In between, I’ll think about what exactly I want from the item. I’ll then spend a session or two shopping around for that item, often adding it to price-tracking tools like CamelCamelCamel.

Why? If I’m going to spend my money on something, I want to get something worthwhile for that money. I want something I’ll actually use. I want something that will actually last. I want something that is going to provide an excellent experience for the price.

I even advocating researching small, regular purchases. It’s well worth spending some time reading magazines like Consumer Reports and knowing what their “best buy” recommendations are for your common purchases, from paper towels to garbage bags and everything else.

Taking this effort ensures that when you spend money on non-spontaneous stuff, you’re getting good stuff at a good price. This should be a completely natural thing, too.

Take Your Time and Be Patient

It is really, really easy to get impatient in life, today more than ever. With so much information available at a click of the mouse, it’s easy to get frustrated when the answers we want aren’t present immediately. It’s easy to get frustrated when the changes we want don’t happen incredibly quickly.

Financial independence uses a mindset that is almost entirely the opposite of that. Financial independence is all about the long term. It’s about patience. It’s about taking your time. It’s about being willing to move slowly toward something big that really matters instead of moving quickly toward something small that doesn’t matter as much.

There are countless specific practices you can use to improve your patience. Active listening is one. Note-taking is another (and I’ll hit on that one again in a minute). Forcing yourself to slow down is yet another one. Different practices seem to work well for different people.

In the end, your focus should be on doing things well more than doing things quickly. Naturally, that’s not always an option, especially in professional situations, but you should strive to do that again and again at every opportunity in your life.

For example, in conversation, instead of just rushing from your point to your next point, actively listen to the other person and respond to what they’re saying instead of just pushing your ideas out there. It takes longer, but it makes for a better conversation and a much deeper connection.

When you’re repairing a toilet, take the time to make sure everything is well connected and cleaned up well. It takes longer, but the repair will last far longer and the bathroom will look better, too.

When you’re doing the dishes, take the time to load the dishwasher properly. It takes longer, but the dishes will wind up cleaner and you’ll also spend less time later reloading the dishwasher.

Practicing patience in the little things in life like this ends up gradually cultivating patience in other areas of life. As with the other steps in this article, it’s not an immediate transformation, but every step in a more patient direction makes achieving financial independence just a little bit easier.

Educate Yourself Daily

Spend at least a little time each day learning something new about the world on a deeper level than a tweet or a news article. This practice is beneficial in several ways.

One, it teaches you something new about the world. That in itself is a good thing. No matter what you learn, you improve your understanding of the world around you.

Two, it gives you material to draw upon when you’re trying to understand other topics. Our world is interconnected in so many ways. The more you understand about a variety of things in our world, the easier it is to understand other things as they’re presented to you. You can make sense of things much easier.

Three, it forces you to think. To understand a new idea requires you to use your mind in a powerful way. Your mind is like a muscle in that the more you use it, the stronger it becomes. Learning something new is much like a powerful workout at the gym, except that it is your mind that is growing. It becomes much easier to learn other things if you’re familiar with the practice of learning.

Four, it can open up new avenues for earning money. Whenever you learn a new skill or become more proficient in a certain area, you become more likely to be able to capitalize on that skill or knowledge. At the very least, it can help you keep the expense of specialists at bay.

Finally, it can open up new avenues of personal interest. Areas that previously seemed dull can gradually be illuminated and become exciting to you as you learn. I’ve found myself taking on a serious interest in many things that I would have scoffed at earlier on in my life.

Personally, I spend some time each day (usually) reading an article or a section of a book that is either a factual presentation of something I don’t know much about (and would like to know) or presents a perspective on an issue that’s different than what I think or what I’m normally exposed to. I try to take notes on that article or book section as I read because I’ve found that I recall things much better if I write them down with my own hand.

I usually try to spend some time at least a few times a week on learning a new skill. I’ll figure out how to repair something or how to install a level shelf or how to play a musical instrument.

This process enriches my life in many dimensions. I’m much more willing to do things for myself. I’m much more willing to explore the world around me. I’m much more willing to try things outside of my comfort zone. All of those things point in the direction of financial independence.

Maximize Appreciation of the Free Things in Life

For me, this seemed to naturally evolve from some of the other practices on this list, particularly when I took on the practice of learning new things and new skills every day and when I started seriously examining the line between needs and wants and realizing how much bounty my life contained.

It doesn’t cost me a thing to experience the warmth of sun on my neck or the touch of coolness that comes from the breeze.

It doesn’t cost me a thing to go exploring in the woods and finding interesting things, like an ancient graveyard or an old house or a pond.

It doesn’t cost me a thing to do a bunch of bodyweight exercises and feel the endorphins rushing through my system.

It doesn’t cost me a thing to meditate or to pray and lose myself in the power of the moment.

It doesn’t cost me a thing to pull out an old board game from my shelf and play it or to pull out an old book from my shelf and read it. It doesn’t cost me a thing to check out a book from the library, either.

It doesn’t cost me a thing to start a collection of rocks I’ve found or of birds I’ve seen or of geocaches I’ve located or of mushrooms I’ve spotted.

It doesn’t cost me a thing to kiss my wife or hold my youngest son or make my daughter laugh that wonderful laugh that she has.

The more I engage in all of those things, the more I realize how much beauty and depth and joy they contain and how much they bring to my life.

It leaves me wondering why I spend money on so many of the things that I do. And that leaves me spending a lot less money. And that leads, unsurprisingly, to achieving a lot of financial goals.

Build Reinforcing Relationships

When you think about the other elements of this article, ask yourself this: is this how the other people in your life think and behave?

Do the people around you actively listen to you when you talk to them? Do they spend their time trying to learn new things? Are they careful about their purchases? Do they like to engage in things that don’t cost money, whether they’re with you or in other situations?

People like that already have most of the elements of a mindset of financial independence. It’s present from their behavior.

If you wish to cultivate a similar mindset, those are the people you should be spending time with and building a strong relationship with.

Why? The people you spend time with rub off on you. Many of their habits and interests and quirks integrate themselves into your own life. If a friend of yours spends a lot of time on a hobby, chances are that you’ll at the very least be more aware of that hobby. If a friend of yours practices certain daily rituals, the chances are greater that they’ll seem normal and inviting to you as well.

Evaluate the people in your life and see whether or not they are living lives that point toward financial independence and personal growth. When you find people that are, make an extra effort to build a stronger relationship with those people.

Doing so will give you friends who listen, friends who won’t encourage you to spend money on needless things all the time, and friends who will often have valuable insights into all kinds of things in life. Their behavior will rub off, too.

Final Thoughts

Financial independence is most successful when it’s not something you hold at a distance in your life. Instead, it becomes integrated into everything you do, becoming a part of your day-to-day choices even when those choices seem to have little to do with money.

It’s not an on-and-off switch, either. It’s a gradual process. No one should drop all of their friends, change all of their hobbies, and completely alter their time use all at once – that’s not healthy.

Instead, draw on these steps little by little throughout your life. Bookmark this page (or save this email) and look at it regularly. When it comes into your mind, try some of these practices. Be patient with a purchase. Learn something new today… and then again tomorrow. Call up a friend who exhibits some good financial independence traits and invite them over for dinner. Go for a walk in the woods and appreciate the beauty around you.

All of these steps build on themselves and reinforce each other, gradually changing how you see the world.

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