Financial Independence Is A Byproduct Of Mindset (Part 1)

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Please don’t tell your financial advisor or your personal finance coach or any of your old finance professors from college what I’m about to share:

To achieve financial independence you need to know very little about personal finance.

In fact, when people ask me for advice on investing or becoming better at managing their money I often point them towards books that aren’t even about personal finance. I’ll recommend books like Ego Is The Enemy The Slight Edge, Mindset, or So Good They Can’t Ignore You.

The reason for this is because financial independence is simply a byproduct of mindset. This is why ‘Finance’ is the fourth and arguably the least important pillar in the four pillar framework. Once you develop a personal philosophy on life and learn about the psychology of human behavior and develop an unwavering work ethic, the natural byproduct is financial independence.

It is counter-intuitive to think that the key to conquering your finances is to focus on areas in your life other than finance, but I will explain why this is the case. In this series “Financial Independence is a Byproduct of Mindset” I want to give an in-depth explanation of what I would say if someone came up to me and said “Zach, how do I achieve financial independence?”

In this Part 1 of the series I will cover personal philosophy, the cornerstone of achieving financial independence.

Personal Philosophy

First and foremost, before you even begin to think about your finances or where to invest your money you need to first develop a personal philosophy. Your personal philosophy answers the question “What do I hope to achieve in life?”. The sad truth is most people do not have a personal philosophy. They simply meander through life with no underlying purpose driving their actions.

Now don’t confuse this with ambition. Plenty of people have ambition – they are ambitious to become rich, buy a big house, own several cars, have a lucrative career, etc. But often these ambitious goals have no underlying reasoning behind them. If you ask someone why they want to become rich and buy a big house they’ll likely struggle to offer an explanation or say something along the lines of “Because isn’t that what everyone wants?” or “Because it will make me happy” or “Because that’s the American dream.”

The “Common Goal” Fallacy

The problem with these vague explanations is that they aren’t based on that specific person’s unique interests and goals in life. These goals are instead based on the assumption that because owning a large house with several cars is a common goal that it is the right goal to pursue. 

This is one of the most widespread and unfortunate reasons that most people never achieve financial independence, which brings me to my first crucial piece of advice:

Become self-aware of what you want in life and develop a personal philosophy around it.

I think of a personal philosophy as a compass that points you in the direction you need to go. Without it, you have no direction to aim for, which leads to wasted time and wasted money. When you have a philosophy you have a purpose behind your actions.

The first benefit of this is that you naturally become more conscious of your spending because you constantly question whether or not your spending aligns with your philosophy. Before placing a down payment on a new home you’ll be forced to consider whether or not this purchase aligns with your purpose. Is this the absolute best way to spend your money to help you achieve your goals? Could this money instead be saved or invested in a different way that would push you closer to obtaining your goals?

The problem with not having a personal philosophy is that your spending will naturally mimic the spending of the majority of peopleBut guess what. The majority sucks at spending.

The majority spends unconsciously because they have no compass to refer to when making purchases. Without a compass they have nothing to consult when spending their money. This leads to mindless spending on stuff that brings only fleeting happiness.

Don’t let the majority dictate how you spend your money. Develop a personal philosophy based on your own unique goals and interests and let that dictate your spending behavior.
When you have a personal philosophy you become a more meticulous, mindful spender, which in turn makes you a better saver.

Developing a Personal Philosophy

Developing a personal philosophy can be tough. I know this because I’ve wrestled with it for a long time myself. It requires self reflection and inner contemplation. It requires you
to spend time alone and get to know yourself. To develop a personal philosophy, attempt to answer this one question: “What do I want to accomplish on my short time on this earth?”

Maybe you have never thought about this before. That’s perfectly fine if you haven’t because most people never have, but the best time to ask yourself this question is now.
A good place to start is by thinking about what you would like to do every day for the rest of your life if money didn’t matter at all. If you could only do one activity every day for the rest of your life what would that activity be? This might require some thought and the good news is that you don’t need a permanent response that is set in stone.

Your personal philosophy can change over time and that’s fine because as we go through life we meet new people and have new experiences and learn new skills and acquire new knowledge so naturally our aims and desires will change, at least a little bit. But you at least need to develop an initial personal philosophy. Accept that it may change over time, but at least give yourself a place to start.

My own personal philosophy is: “Find the most effective ways to achieve freedom in life and share these insights with others.” It’s simple and it encapsulates what my purpose is and what I aim to do. It may change over time but it is a vital compass I refer to every day.

So I’ll leave you with this: Think about what you want to accomplish in life. This can be a tough question to answer and it will require some deep thought. But this is the first step you must take if you hope to achieve financial independence, and beyond that a life of meaning.

Read part 2 here.

Feature photo credit: waterfall

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3 thoughts

  1. This really resonated with me. I am honestly horrible at math and barely understand the concept of investing. Buuut I’m still able to save 50% of my income by making smart decisions to cut spending. You can be a totally normal person and get out of debt or build wealth. Your attitude and ideas are the most important part of achieving financial independence. It certainly helps to have a crapton of money, but you have to know how to bend that money to your will to be successful.

    1. I couldn’t have said it better myself. Too many people are intimidated by the scary world of investing, but investing is actually the simplest part of achieving financial independence. Mindset must come first. Thanks for the feedback 🙂

  2. Agree on this point 4PF! It really is about the mindset although the knowledge about investing can then help to take the action.. having solid convictions for the goals and acceptance that there are going to be challenges along the way is key as you mention though!

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