Why do so few people achieve financial freedom? The answer varies from person to person. However, it may be due to a lack of careful planning, poor saving and investing habits, and a fear of making short-term sacrifices.
In fact, according to a survey by Achieve, only 11 percent of Americans report being financially free.
“We’re seeing far fewer Americans with the goal of becoming ‘rich’ and many families pivoting to just trying to be able to pay their bills on time. With all of the economic pressures facing American families, financial freedom is currently more about making ends meet,” said Brad Stroh, co-founder and co-CEO of Achieve. “Reaching financial stability is particularly challenging for consumers living with debt.”
However, financial independence is still possible despite the uphill battle. Earl Nightingale’s seminal work, The Strangest Secret, provides a blueprint for this. Despite its simplicity, this blueprint requires a significant shift in mindset and discipline.
So, in this blog, let’s explore the insights Nightingale provided so we can become one of the few financially independent.
Understanding the Reality of Financial Success
According to Nightingale, only five out of 100 people become financially independent by age 65. While that stat may not be accurate today, it’s not far off. In 2023, 28% of Americans said they were completely financially secure. Bankrate finds that only one quarter (25%) of Americans are economically secure today.
The key takeaway is that financial freedom does not happen by accident. Instead, you must act deliberately and consistently to join the top five percent.
Action Point:
- Accept the challenge. Understand that attaining financial freedom requires more than just hard work; it also requires a focused strategy. Only by accepting this reality can a purposeful planning process begin.
The Power of Nonconformity
According to Nightingale, breaking free of social norms is essential. Most people follow traditional career paths and financial habits, resulting in subpar financial outcomes. On the other hand, a financially successful person thinks differently, challenging conventional wisdom and pursuing unconventional paths.
Action Points:
- Defy the status quo. Follow your own path instead of following everyone else’s. Critically examine your career choices, spending habits, and financial goals. After all, you might not apply what works for the masses to your situation.
- Cultivate an entrepreneurial mindset. If you’re running a business or working in a corporate environment, adopt a proactive, problem-solving approach. For example, find ways to innovate within your career to make it more rewarding.
Two Pillars of Financial Success
According to Nightingale, financial success is determined by two factors:
Career development.
The top five percent constantly improve to remain at the top. By investing in education, networking, and skill development, they position themselves for higher-paying positions or successful entrepreneurial ventures. In addition to increasing earning potential, mastery creates long-term value as well.
Action Points:
- Invest in yourself. Enroll in courses, attend seminars, and read books to become an expert in your field.
- Build a network. Surround yourself with people who share your growth mindset. Networking can lead to many career opportunities, some of which are not otherwise available.
Consistent savings.
The financially successful earn more and save more. They practice disciplined saving to accumulate wealth. In turn, consistently saving and investing develop a financial buffer and promote long-term growth.
Action Points:
- Automate your savings. Set up an automatic transfer from your income to a savings or investment account. As a result, you’ll be able to save regularly without making any decisions.
- Focus on the long term. Make saving a priority, even if it’s a small amount. As this money compounds, wealth will be created over time.
Breaking Free from Conformity
Nightingale emphasizes the importance of thinking critically and setting yourself apart from others. Why? It is common for people to live paycheck to paycheck, or to follow outdated financial advice. However, to succeed financially, you must make smarter financial decisions than those around you.
Action Points:
- Think critically. Whenever you make a financial decision, ask yourself if it is the best choice or if you follow conventional advice. For instance, is it truly a good investment to buy a home? Is it a good idea to follow the traditional retirement path?
- Take calculated risks. Risk is often necessary for success, but it should be carefully considered. As such, consider starting a side business, investing in real estate, or exploring the stock market after thorough research.
- Set financial goals. Financial objectives give you direction. Without them, you won’t know what to do. Set specific, measurable, and attainable goals like saving for a home, investing a set amount each year, or retiring by a certain age.
The Role of Planning and Execution
To become financially independent, you must develop and adhere to a plan with discipline. Five percent of people plan out their financial journeys to achieve financial freedom. As part of this, you should create a budget, track your expenses, and adjust as needed.
Action Points:
- Create a financial plan. Identify your goals, budget, and investment strategy, and develop a comprehensive plan to accomplish them. In addition to short-term needs like emergency savings, a long-term plan should include retirement or debt repayment goals.
- Keep a close eye on your progress and review your finances regularly. Have you saved enough? Are you on track to reach your goals? If necessary, adjust your strategy, but stay focused on the long term.
- Stay committed. Years or decades can pass before financial independence is achieved. Stick to your savings plan and continue to improve yourself, even in difficult times.
Mindset Shift: Viewing Wealth as a Long-term Game
One must understand that wealth-building takes time and effort to achieve financial independence. Moreover, patience, discipline, and persistence are the keys to success. When faced with challenges, this mindset will prevent impulsive decisions and give up.
Action Points:
- Be patient. Don’t fall for “get rich quick” schemes and accept that building wealth takes time. You should instead focus on steady progress, knowing that small steps add up over time.
- Cultivate resilience. Don’t lose focus in the face of setbacks. There will always be market downturns, career challenges, and unexpected expenses, but maintaining a disciplined approach will help you navigate them.
Conclusion: Action is Key
Financial independence is within reach if you take a proactive approach, think critically, and practice discipline. You can achieve true financial freedom by investing in your career, saving consistently, and challenging conventional financial wisdom. You may have to look critically at someone old or gone, like Earl Nightingale, and listen to what they say, utilizing any wisdom you glean from any source it may come from.
And remember the five percent who succeed, not the crowd, have their own paths to follow.
FAQs
What does financial independence mean?
Despite the same general concept, financial independence can mean different things to different people. Some might consider it to be saving enough to retire early, while others might consider it just being able to cover their basic needs.
It is important to note that financial independence often goes hand-in-hand with financial freedom, which is the freedom to make financial decisions without being constrained by money.
How can I increase my income?
- Negotiate a raise. If you have performed well for your company and have been there for a while, you should ask for a raise.
- Take on a side hustle. Take advantage of opportunities to earn extra income, such as freelancing, starting a small business, or driving for a ride-sharing service.
- Invest in yourself. Consider taking courses or obtaining certifications to increase your earning potential and improve your skills.
What are some effective saving strategies?
- Create a budget. Make a list of your income and expenses to see where you can cut back.
- Automate savings. You can set up automatic transfers to an investment or savings account.
- Reduce debt. Pay off high-interest debt as quickly as possible for more money to save and invest.
- Live below your means. Stay on top of your expenses and plan your lifestyle according to your financial goals.
- Reduce unnecessary expenses. You can save money on essentials such as housing, transportation, and food if you know where to look.
How important is investing for financial independence?
In order to grow wealth over the long run, investing is essential. If you want your money to work for you, consider investing in stocks, bonds, mutual funds, or real estate.
What is the FIRE movement?
FIRE (Financial Independence, Retire Early) is a trend encouraging people to invest wisely and save aggressively to achieve financial independence.
Image Credit: Karolina Kaboompics; Pexels
