The ideas laid out in this section form the building blocks for a guaranteed successful path to financial independence. As the certified life coach Rob Liano said:
“Knowledge is power? No. Knowledge on its own is nothing, but the application of useful knowledge, now that is powerful.”
This very impactful statement is the very principle that will transform what is found in these articles to a life filled with less stress and greater happiness.
One of the repeating theologies of the research I’ve performed and what I currently practice is that 40% of your daily behavior is based on habits. The articles in the foundation section will provide the framework for building those healthy habits. Your path to success will be on cruise control!
The foundation blocks can be broken down into four sections:
- Pay off debt
- Living Frugal
- Investing
- General Knowledge
While the foundation articles will be heavily focused on what to do with you money it is important to remember that money is only being used as the tool to build your financially independent future. It is important that you have read my start here article because it will really connect and help strengthen the points to the foundation.
Paying off debt
When I unknowingly began my FI journey back in 2012 I was introduced to the snowball concept for paying off debt. The premise of the snowball method is that once a debt has been completely paid for the money put towards that debt will be put towards the next debt. This continues until all your debts have been cleared. Check out the article My Money Snowball for a more in depth explanation.
If you are one of the people in the FI community that has chosen to purchase a home rather than rent then there are two options that you will have to choose between. The first is to set up a 15 year fixed rate mortgage and pay the minimum payments. The second option is to accelerate the payments and pay off the debt early. The first option is financially the best option but the second option is psychologically the better answer. Check out House Pay off in the Engineer’s Toolbox for a closer examination.
Check out these articles for more information:
- My Money Snowball
- The True Cost of Bad Habits
Living Frugal
The idea of a frugal lifestyle can have a negative connotation if it is not truly understood. Living frugal begins by developing financially sound decisions and sticking to them. Some examples of living frugal are:
- Doing your own house repairs
- Cooking instead of going out to eat
- Going to parks and libraries
- Avoiding impulse purchases
- Splitting firewood for heat
The ideas listed above, and even more in the Frugal Living Intro article, will put more money in your pocket. HOWEVER, unless you capture those savings and invest then all that effort will be for nothing!
Investing
The FI community is not based on the premise of building up a large bank account and living like royalty. The lifestyle defined by your habits before and after FI will determine how much wealth you will need to accumulate. Check out worksheets in the Engineer’s Toolbox to find out how long it will take you to reach FI based on your current investment strategy.
Check out these articles for investing basics:
- Earn, Spend, Save
- Stock Basics
- Marginal Tax Bracket
- Investing Wallet’s
- Dividends & Return on Investment
- Liars! A Penny Saved isn’t a Penny Earned!
Once you have mastered investing basics check out Living Quarters Investing for more!
General Knowledge
- Mortgage 101 (Total housing payment less than 25% take-home pay, 15 yr fixed rate)
- Net Worth (When FI Begins)
- Taxes Deductions/Credits
- Credit Card Beware
- Liabilities VS Assets
- Passive Income
