The 3 pillars of financial independence

For most of us, there is nothing simple about reaching financial independence. It takes time and dedication and may still be out of reach for many. 

But to understand the three pillars of financial independence is simple.

And understanding these core principles will help you formulate a game plan to achieve your goals.

The 3 core pillars of financial independence

I firmly believe that everyone should have a game plan for financial independence. 

And the main objective does not have to be about reaching financial independence. 

It is, of course, great if you do, but regardless, the process will create an awareness and understanding that will help you make smarter decisions. 

1. Spend less money

Looking at what you spend is usually the fastest way to improve cash flow and your personal finances in the short term.

Divide your spending into two different groups.

  1. Necessary spending
  2. Spending by choice

1. Necessary spending – a source of substantial savings

Necessary spending includes utility bills, transportation costs, and bills from service providers. 

These bills may be necessary, but are you paying more than you should?

  • Do you have a competetive credit card and the most favorable rate?
  • Is there a better cell phone plan that will save you money?
  • Are you paying too much for home content or car insurance?

Contact your service providers and ask for a better rate.

Do not be passive. Take charge and ask for a better rate, salary, or conditions in general. Be polite but firm, and you may be surprised by the outcome. 

2. Spending by choice and finding a balance

It is hard to be rational at all times. And for most of us, it is necessary to spend money on non-essential things to enjoy life.

And I believe it is essential. I look at it like this.

You have a game plan for financial independence to achieve personal freedom and a fuller and more prosperous life.

But is it worth it if the process makes you feel miserable every day? 

I don’t think so.

There is, however, value in spending smart. Use your bank or credit card statements to look for patterns of spending. 

  • Do you need to eat lunch out every day of the work week?
  • Is the daily $10 visit to the coffee shop worth the cost of $200 per month?
  • Is public transportation an option to save money on transport costs and parking?

Only you know the answers to these questions. 

2. Make more money

There is a maximum cap on how much you can save every month. You can never save more than you spend.

But there is no limit to how much money you can make. 

One way to make money can be to put your saved money to work to earn interest, dividends, or other forms of investment returns.

And there are several ways to make money without leaving your home. These are my top 3 favorites.

Participate in market research.

Companies like Swagbucks, Inbox Dollars, and Branded Surveys will pay you for taking online surveys in your spare time.

Minimum effort but also limited earning potential.

Work as freelancer

Websites like Upwork, Freelancer, and Fiverr have a network of professionals looking for freelancers to perform any number of tasks.

Sign up for free, list what you can offer, and start marketing your work to a global audience.

You can start earning quickly, and while the earning potential is excellent, the skills you offer will dictate the level of your earnings. 

Start a blog

Anyone can start a blog today. Gone are the days when you needed to know programming languages and web design.

The earning potential is excellent, but for most people, it takes a minimum of 6 months to make money from a blog.

3. Manage money more wisely

Money management comes down to making your money work for you. 

Whether you have hundreds or thousands of dollars, there are ways to make your money work for you.

Interest-paying bank accounts protected by deposit guarantees like the Federal Deposit Insurance Corporation (FDIC) are often viewed as one of the safer forms of investment.

Other popular forms of investments include mutual funds, precious materials, real estate, Bitcoin, other cryptocurrencies, and shares. 

Each form of investment has its risk profile, and you should always consult a financial advisor to ensure you understand the risks before undertaking any investments. 

Your goal should be to accrue a return on your capital that exceeds the current yearly inflation rate.

If not, you are getting poorer as you are losing purchase power.

Did that last sentence not make sense to you? Read this article to understand why the inflation rate matters.

My approach to the 3 pillars of financial independence

I have worked hard all my life, and today I have the freedom to work as much or as little as I want.

Still, I have a game plan that I follow. I apply the theory of the 3 core pillars of financial independence as follows:

1. Spend less money

I contact banks and service providers for better terms once a year. Using several different banks helps me get the best possible rate.

I am not wasteful but also not a great saver. But I work hard to be smart with my money. And being smart means not paying more than you have to. 

At the same time, I believe it is essential to enjoy life in the process toward financial independence.

2. Make more money

I work as a consultant on various projects, run three informational websites, own commercial real estate, and manage our money actively.

3. Manage money wisely

I split savings between savings accounts, mutual funds, and dividend-paying and non-dividend-paying stocks. The actual split varies with my market outlook.

Wrapup and takeaway

I can summarize the message of this article in one sentence: Focus on how you spend, make and manage your money.

Get started even if you only have a few dollars to spare.

There is value in the process that goes beyond the result.

So get started today. Now pick up that phone and get a better rate from one of your service providers. 

Meet the author: Mattias (Matt) is a serial entrepreneur and travel industry expert with more than 20 years of experience in business and web development. Mattias identifies with self-starters and entrepreneurs, loves to garden, and believes everyone needs a game plan for financial independence.