Financial Freedom on a Shoestring

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I’ll admit it. I’ve led a life of some privilege. Maybe I didn’t have it easy. But I didn’t have it hard either. Simply by virtue of birth, I inherited most of the essential assets for my journey to financial independence….

No, my parents weren’t wealthy or powerful. I wasn’t given money or land or connections when I reached adulthood and left home. But I received something more valuable: a set of wise financial behaviors that were so ingrained I didn’t even recognize them at the time. Yet, in retrospect, I see that financial independence was almost inevitable given that head start.

Our military family valued integrity, thrift, and hard work. I was technically inclined and earned an engineering degree which led to a high-paying job. I had modest tastes in houses and cars. I married a wonderful woman with the same values. The end result after 50 years of living — financial freedom — was almost a foregone conclusion.

Seeing Opportunity

But many people don’t get the advantages I had. What about those without that head start? Perhaps you’re one, or know somebody — family or friend — who is beginning from financial “ground zero.”

(Or, maybe you’ve already arrived at financial independence: If so, how about sharing some of your own lessons learned in the comments below? What do you advise those starting out with very little?)

Some are born into circumstances where ethical behavior and personal industry aren’t valued or rewarded, where wealth is believed to come from luck or craftiness, where instant gratification is the prime motivation. Some are born with different kinds of talents, like an overriding desire to serve others, that don’t command high economic value in today’s world.

It’s hard enough hanging onto your money and growing it wisely even if you have a strong family foundation and earn a 6-digit salary. So what can I say to the many who don’t have it so good, who still want a better life and ultimately financial freedom? Does the average person have a realistic hope of getting ahead in today’s world?

Sadly, no. If you’re going to be average, then you will get average results. But there are many ways to distinguish yourself, and they don’t all require having natural advantages. In fact, many people have leveraged their “disadvantage” — a major obstacle in their life — into a story that drives their success. Human beings in all times and circumstances have proven it is possible to generate value for others, make a decent living, live on less than they bring in, and invest the difference wisely.

I believe that financial freedom is always possible, though it will be harder for some, especially for those born without role models for wise financial behavior, or who don’t develop in-demand skills. It’s a question of seeing opportunity. I graduated from college at the start of the personal computer revolution. It was the “gold rush” era for computers, and there were lots of opportunities, if you were in position to notice them. But there are always opportunities on some frontier, in any era.

How do you take advantage of those opportunities? What are the prerequisites for financial independence? What factors and habits must be in place, and what tactics must be employed, to make steady progress in building wealth? Below I’ll share some lessons I’ve learned, in hopes they’ll speed your own journey….

Building a Foundation

Before we talk about the concrete steps toward financial independence, we need to touch on certain qualities that make it all possible. These are invisible to many of us. Either we received them from our families by slow instruction and take them for granted, or we were never exposed to them and don’t know they are of value. Many personal finance problems — especially those related to overspending — are symptoms of poor underlying emotional or psychological health, which can be improved by the following habits of mind….

Values — without connection to a force, principle, or cause greater than yourself — whatever you call it, it’s difficult to make the wise decisions that ultimately lead to your own happiness and prosperity. Much wisdom is available via traditional and other sources, if only we can find and connect with it.

Cause and effect — without a belief that your good efforts will be rewarded in due time, you can’t go far making the investments that will be required of you. Those who have experienced injustice, misfortune, or abuse are doubly injured if they’ve given up believing that their own efforts can change their circumstances.

Patience — financial freedom is about investing. Investing is ultimately about deferring gratification — allowing time to pass and wealth to grow for harvesting in the future. Without the character quality that allows for contentment in the present, while doing the hard work for a better future, it is not possible to succeed financially.

Relationships — your outer life and your personal finances will reflect your inner environment — your state of mind and your personal relationships. A strong “family” — traditional or otherwise — is essential support and motivation for our accomplishments in life. Everyone has their own path: For me, it was only possible to make significant financial progress on the basis of a stable and joyful marriage.

Independence — financial independence is not “normal.” Most people spend most of what they make, fixated on near-term gratification more than future security and freedom. To get different results, you’ll have to break the mold and be different. Some people will reject you because of that. But, if you’re going to buck the mainstream and build the assets for early financial freedom, you can’t care very much about what others think.

This list is descriptive, not prescriptive. Outside of family and spiritual life, I don’t know how to transmit these values. I can just write about them a bit, and hope others will be inspired.

Investing in Yourself

Now we can begin to discuss the specific tactics for financial freedom:

Your wealth is ultimately a reflection of your value to others. To increase your earnings, you have to invest in yourself. You make yourself a better and more valuable person, and the world will end up paying you more.

For many people, the ability to land the kind of stable, high-paying job required to build wealth will begin with a college degree in a field in high demand. But learning doesn’t start or stop there.

Credentials can be overrated. Yes there are professions (medicine, law, and some types of engineering) where they are required. But often credentials are just an excuse for one group of people to charge another group for perceived access to a job market. I have a Civil Engineering degree, but 90% of my career value came from skills I learned after college. Software engineering was barely a subject when I went to school, so I learned how to design and implement software on my own and on the job.

When I began working as a software engineer, I read virtually every available book on the subject. I spent nights and weekends learning new tools, because I enjoyed it, and it made me more valuable at work. In addition to reading, I went to conferences and networked with leaders in the field, picking their brains for the most efficient programming techniques. Later on I read books on relationships, psychology, and management, so I could work more effectively with my colleagues.

Your true education comes from reading, trying new things, finding mentors, asking questions, practicing. Most of the time, what really matters is not the diploma on your wall, but your actual real-world ability to get the job done. Credentials may get your foot in the door more easily, in some cases, but it’s your ability to produce results at the right price, that will get you noticed and moving forward.

In addition to investing in your career, keep learning about money. Read everything you can on investing and personal finance. Our education system is sadly deficient in teaching basic personal finance survival skills. So you must take your own steps to educate yourself about how money and investing works. Reading independent voices with real-world experience, like, and the other blogs I’ll mention below, is a great way to start!

Changes in yourself don’t come overnight. I can’t guarantee that self-improvement will make you a millionaire. But I am certain that if you consistently and intelligently invest in yourself, you will have more financial freedom and a more successful life.

Spending Less

Nobody thinks they have enough. It’s the nature of human life not to feel satisfied. Even a third of those who earn six figures are anxious and feel like they are living on the edge.

You can work on your financial life from two angles: earning and spending. The key to earning more is investing in yourself. The key to living well while spending less is creativity. You can’t buy all the usual products and services. You have to create a lifestyle on your own terms.

Whether you are a college student or a millionaire, living below your means — spending less than you take in, is a fundamental behavior of all those who become financially independent. If you were born with this trait, wonderful. If not, analyze your lifestyle to see if you can cultivate it. It is absolutely essential.

Get in touch with your motivation for spending money. Are you buying things because other people are buying them, or because the advertising says you should, or because you think the act of buying itself will somehow make you better?

My wife and I try to ignore what the rest of the world is buying. We spend freely in the few areas that are important to us, and relatively little in the others. We’ve saved tremendous amounts of money compared to many otherwise wealthy Americans because we have not generally splurged on expensive homes, furnishings, vehicles, or vacations – those “big ticket items” where the cost is often compounded because people borrow and then pay interest.

I offer some further tips to reduce spending elsewhere on this site. But other blogs and writers have even more unique and creative ideas for living cheaply. Here are a few of my personal favorites:

Getting Out of Debt

When you spend more than you earn, you create debt. Personal and public debt are among the most serious problems of our time. Once created, debt has the pernicious quality of getting “worse” — if you do nothing about it — thanks to the obligation to pay interest. Debt and interest payments are one of the most lethal threats to your financial independence and freedom. In my opinion, most kinds of personal debt should be avoided at all costs. You simply can’t pile up wealth while simultaneously digging yourself into the ground with its opposite: debt. Eliminating debt must be one of your top priorities on the path to financial independence.

I claim no great expertise on debt. I’ve avoided it like a plague my entire life. But my friend Todd Tresidder at FinancialMentor, who runs a financial coaching service, has helped many clients with their debt problems. And he’s distilled much of his wisdom into a Complete Guide for How To Get Out of Debt. In this valuable article, Todd reveals why debt is not really a financial problem, and outlines the only permanent solution — much of which sounds just like my “foundation” above. (Warning, introspection and behavior changes required.) Then Todd provides the specific steps or tactics for reducing and eliminating debt and its causes, including an excellent explanation of how risk management can prevent some of the most common causes for debt.

That last point hints at one of the prime reasons for debt: “unexpected” or irregular expenses. Those who don’t plan for the unexpected are doomed to be victimized by it. That’s because, while the actual unexpected expenses we’ll incur are unknown, the fact that they will occur is not. Life happens. Unexpected expenses may be as traumatic as a major illness, or as mundane as new tires. Either way, remember that unexpected expenses are certain — only their timing and nature are not.

If you don’t think it’s possible to rid your life of debt quickly, by taking it seriously and focusing all your attention, read the story of the recent graduate who paid off more than $23K in student loans in less than a year by working two jobs and living at home. Those same attitudes and tactics will supercharge his progress to financial freedom, guaranteed.

Lastly, if you aren’t the organized left-brain type who can single-handedly corral your emotions and institute a “debt snowball” payment scheme for yourself, then check out this fun website that turns debt payoff into a contest with positive feedback and prizes.

Saving and Investing

In an era without pensions, saving is more important than ever. But, in an era of slowing economic growth, it may be harder than ever. And unknowns such as inflation and government policies may erode savings more than in the past. That said, would you rather be the person with some savings at hand, or the person with no savings at all, one step away from losing their home or going hungry?

Saved assets give you personal and financial freedom. They let you call your own shots in life, instead of being fully dependent on others for jobs, opportunities, or charity. In fact, having savings lets you take advantage of opportunities, and typically leads to even more wealth.

The first place for your savings is a safe, insured bank account. Call this your “emergency fund.” Most experts recommend keeping 3-6 months of living expenses — so you aren’t forced into debt if you lose a job or have a financial emergency. I think that’s a good start. Personally, I favor keeping 1-2 years of living expenses at hand. But, as an older semi-retiree my options are more limited and I need a bigger cushion. Either way, an essential idea is that you can’t live efficiently paycheck-to-paycheck — it actually costs you more. You need a buffer, some breathing room, in order to make good decisions and take advantage of opportunities.

You also need the experience of saving and managing a small amount of money, before you aim higher: After you’ve established an emergency fund, you can get serious about investing in stocks and bonds, real-estate, or a small business, depending on your interests and skills.

Investing in stocks is a long-term affair. You can get your feet wet by learning about and buying some low-cost passive index fund shares. Simple passive index investing gives the average investor the highest probability of success. You can purchase small amounts each of a low-cost broad stock index fund and bond index fund, to begin learning about the markets. Even more important is learning about your own investing personality as the markets go up and down. Conventional advice for somebody with a long time frame is to invest almost exclusively in stocks. But that may or may not suit your personality. By owning small amounts of those stock and bond funds, you begin to get the real-world experience of owning and monitoring your own investments. You get the feel of investing in the markets with modest sums before you start making critical decisions about your entire life savings.

When I look back I have few regrets. But I wish I’d started investing earlier. And I wish I’d understood that low-cost passive index investing is the safest approach, sooner. It took me years to appreciate that successful, high-probability investing isn’t about timing the markets or picking the best stocks. It’s about keeping expenses low and investing in the broad market.

I get emails from readers in their 20’s who are already buying low-cost passive index funds, and I’m excited for them. They are getting a significant head start on the most promising investing track. I wasn’t able to seriously save and invest until my mid-30’s. So anybody in their 20’s reading this is already ahead of the game just by thinking about their future now.

Investing can be largely self-taught, but it’s helpful to have a mentor. Mine was a conservative investing newsletter. But there are many more free and cheap sources of good information on investing these days. Some great places to start include:

Seize the Day

Becoming financially independent by cultivating the right foundation, investing in yourself, spending less, staying out of debt, saving, and investing wisely is simple. But that doesn’t mean it is easy. If it were, many more people would achieve financial freedom, sooner. The barriers are significant, even more so if you started at a disadvantage. But wherever you are now, you don’t have to be limited by your past. Realizing you can make positive changes, is the first step in improving your life.

Make yourself valuable by acquiring skills and experience wherever possible. Becoming valuable to others is the beginning of true wealth. Next, live on less than you make, avoiding debt. Keep your tastes simple, identifying a few cheap pursuits for satisfaction and enjoyment. Living below your means creates a surplus of wealth in your life – extra money that you can grow. Learn how to invest that money wisely. For most people, this is easier and simpler if you tune out the noise and focus on long-term, low-cost, passive index investing.

The path to financial freedom begins with education, and ends with the liberty to work however you choose. Best wishes on your journey!


  1. Great read. Thanks for sharing.

  2. A thoughtful article, Darrow, as always.

  3. I was lucky in the sense that when I gradated from college my parents gave me shares in a company. It introduced me to the stock market and man what a lesson it was. After that I was putting everything I could get my hands on into the market. For 30 years I managed to hold on to one full time job and started a part time landscaping business. The money I made from my landscaping business was mostly invested in stocks and mutual funds. I am currently holding one job and waiting for my government pension to kick in. I am happy to say that I will have a great retirement thanks mostly to the lesson I learned from my parents.

  4. Appreciated your fine article. It wasn’t until late in my career that I recognized the value of low cost index funds, and like you, I enjoy inexpensive outdoor pursuits.

  5. Great article. .I say it can be fun watching your stocks behavior. . Treat your investments like a growing family. I started on my 20’s and still invest. When shopping leave the ego behind. Buy what u need..Nature is the big gift. Picnic

  6. My family was not a great family. Long story short, as a result, my late teens and early 20s had challenges. Money was tight. To this day, I can clearly remember one day opening my lunch bag to my bologna sandwiches, and seeing that the edges of the meat had turned green. I cut off the green edges, and proceeded to eat the sandwiches – I couldn’t afford to go out a buy lunch!

    As time progressed and my income slowly increased, with great consistency I channeled a portion of my cash flow to savings. My savings account balance was a security blanket. Seeing that it had a balance in the thousands made me breathe easier. I wanted to preserve and grow the balance, much more than I wanted to use it as a down payment on a new car. I did not want to ever again be in a position of worrying about covering basic living expenses.

    This “cheapness” is a life long habit that has lasted to this day. Example, I bought my current car new. It is now roughly 8 years old. I am NOT thinking, I should trade it in, get a new one. My thought is, its running well, what can I do to keep it that way for another 2-3 years minimum.

    I do indulge myself. I’ve traveled to both Asia and Central America in recent years. And it was on organized tours, so it wasn’t inexpensive. I’ve also been to Europe a couple of times (no tour company, to save money – language/culture was less intimidating). To balance this off, I take my lunch to work nearly every day. I don’t buy java at Starbucks. Going out for an evening meal happens only a couple of times a month. And ten more similar frugal moves, all of which add up. Like you Darrow, I try to be conscious about spending. Like you, I want to say yes to the expenditures that have high value to me, and I work to say no to those that matter less. In the end, the actions provide to me the financial security blanket I like to have.

    PS. I no longer eat bologna.

  7. Darrow,

    Great post. Our backgrounds are very similar, and I think that you for the most part hit the nail right on the head. I am very interested in this topic and have written a series of blog posts on it myself, summed up in the link below. (not sure if you allow linking in your comments, if not just edit out and sorry)

    For us, the key was building a very high savings rate early by developing earning power through education and skill development without accumulating debt in the process (which admittedly seems to be getting harder to do), developing a supportive marriage with a person of similar values, and limiting spending outlays in the big areas of housing and cars.

    Once a high savings rate is achieved, learning about investing and tax planning are tremendously important. Unfortunately we were pretty late to the party in both of these areas or we could have achieved FI pretty easily within 10-12 years instead of 15-16. (I always thought I was pretty smart comparing myself to peers and then started reading Mr. Money Mustache and other ER blogs and realized I wasn’t so smart as my peer group changed!)

    I feel that if you master these things then most other things simply take care of themselves or are icing on the cake that will allow for the achievement of FI even faster. I would think that if you don’t master these major areas, it would be a struggle and feel more like sacrifice which we have never really experienced.

  8. As Ken said Darrow: A thoughtful post as always.

    I frequently wonder just how transferable these wealth building skills really are to those not raised with some of the basics you mention.

    Thanks for the link. I’m honored!

    Not sure if you’ve noticed, but I’ve had the occasion to use your wonderful Savings Rate/Years to Retire chart in both of my last two posts. Each were case studies.

    • Thanks for all of that Jim. (I noticed.) And I wonder the same about transferring those wealth-building skills. It may not be possible or easy, but still we try in our different ways…

  9. I’ve lived most of my life by these principles, and have good results to show for it (including the ability to be very generous to deserving people and organizations). But several years ago, while temporarily insane, I bought a new BMW and some of those fancy high-end appliances. After the Beemer spent 10 days in the shop and basically imploded, and I waited months for appliance repair parts, I was very relieved to return to mainstream, economical cars and consumer goods!!

    • Thanks Phil. You bring up a good point that I’ve noticed too: I’ve splurged on some nice stuff in my time. Sometimes it works out great with higher quality and more functionality. Too often though, those high-end purchases are finicky, high-maintenance, and enslaving. You have to ask yourself, who owns who?

  10. Well, all very informative ideas, paths, and promotion to all. Yet, it is quite hard in today’s society to understand these concepts. Even living modestly, you hear that college loans are huge for graduates, save into IRA, wages are down, health insurance, life insurance, and just plain living. I can verify all of the above through myself, kids, and friends. The middle class is not the middle class anymore. We barely make low six figure ball, yet just in past few years. I am in public service worked up through ranks starting at $12,696. So with a family and high mortgage rates back in 80s it was check to check. Yes, now I can save and have a pension. Great for me, but the new upper poor class (which also includes me). doe not have defined pensions, has to save into IRAs or other accounts, does not make loads of money, and has over $80 K in student loans. They are automatically behind. Yes, to install the needed knowledge is great but capabilities are low. I love to read all of these articles about do this and do that but realistically and economically it is really impossible for the average lower poor class family to strive. Not all college students have gr8 GPA’s, obtain scholarships have been stated you get grants (which the FAFSA is quite a joke too) and still have to pay back. Education is a key component but the elimination of defined pensions can make, break , or change the future retiree show permanently. Only the companies make out by this. Even IRA or profit sharing has been a scam because companies write in a “discretionary” matching %. Let’s look at our view, the modest household, whom again lives check by check the reality!

    • I hear you, these are real issues. I live in that no-pension world. Student loans for degrees that don’t pay are a dubious solution. What answers I have are in my post. Wish I had more.

    • @zon05454:
      I know your pain. My youngest daughter took five years to finish her degree, lived at home, went to a local university. With her working part time, a scholarship (Bright Futures-Florida) and Dad’s help graduated debt free. She was originally going into law school but changed her mind when she watched newly graduated lawyers saddled with massive debt during the Great Recession which peak during her graduation year unable to find employment . Her major was law but her minor was business. She is working at a bank now as an accountant. So this smart girl side step the debt trap.

      I went to school at night for years but many courses I needed to graduate for the degree I was seeking were only given during the day. I had kids and a nonworking wife. So I had to work and at that time night jobs were scarce in my area.I found a technical job that I could learn on the job and took all the classes possible to improve myself. I make in the low six figure salary but live frugally which has allowed me to save and invest. At sixty two I am financially independent and will retire at the end of this year. My cash flow will be about 90K per year provided by a pension and Social Security.I do not need to tap my retirement savings until RMD age. And before I get attacked about the pension, I and my employer contributed to it. And the new hires get a cash balance plan and 403B plan with some matching on the 403B plan. I would of done as well or better if that had been in place when I first started my job because the propensity of saving is strong in me. We all have hindrances. It will take different folks different time intervals to get to the goal of being financially independent. But the vast majority of us can do it.

  11. Darrow as always a phenomenal article and very thoughtful personal account. The “independence” paragraph really hit home with me. We have a similar background with my husband who was a mechanical engineer and I was in sales. We came from frugal families who talked about money and respected the process of gaining it and keeping it. When we got married 32 years ago my husband said he wanted to retire at 50 and most people said “what”?! when they heard that idea. For 32 years we denied our selves some things that we could have bought but for long term did not make sense. When we retired two years ago at 54 and 56 people were still saying “what”?! at the idea of retiring. As you said people reject ideas that are not normal and foreign to them. Or they reject them from an outside perspective but internally they are asking them selves maybe they could or should have done better.

    On a side note, Our financial advisor said some thing interesting to us the last time we saw him and that money is just a tool. That statement removes all of the emotion out of saving, investing and how people perceive doing those instead of spending everything.

    Keep up the awesome work and thank you!

    • Thanks very much Sue. Your story is inspiring, and a good example of long-term thinking. Yes money is just a tool, and one that gets more valuable over time if we use it wisely. Congrats on reaching your goal!

  12. Fred Westenfeld says

    Hello Darrow. Thanks for another excellent read. The straightforward approach, using simple, honest techniques, makes your suggestions feel real and achievable! The first thing I am going to do is share this with both my children (24 and 22), and my nephew (25)!

  13. Darrow, Thanks for another great read. You have no idea how much this article hit home for me. To be brief, how many people over the years did not value my efforts. Said that success was out of reach and you wouldn’t “make” it. And yes, looked at you much differently than most and questioned your hard work.

    It was indeed hard. Especially on a very modest income. But I DID make it and it was worth it. Financially independent today.

  14. Retired Early says

    Darrow – This post, coupled with your post on how you retired at 50, really ought to be taught in high school. Even if early retirement is not your goal, the same game plan can be applied to achieving just about any tough goal.

    On a related note, I have a question for you. Similar to you I retired very young by societal standards (46). I’m wondering if you get the same accusatory looks that I do by the Occupy-Wallstreet-types when you “admit” you retired so young. There seems to be a hostile assumption by some that I must be a silver spooned trust baby in order to dare to be “retired”. Others (aka older folks with the grey hair to prove it) also seem to respond negatively as if I am somehow not worthy of classifying my work status with the same label as their own. They tend to raise an eyebrow and in one way or another try to figure out how I “cheated”. Do you get this same reaction when meeting new people? Interested to know how you handle?

    • Thanks for the sentiments RE. I agree, these are general financial principles. The goal doesn’t have to be retirement or financial independence, but that is often the result.

      Interesting question on human relations. Yes, I’ve experienced a bit of those attitudes: “You’re too young to be retired!” Though it’s tailing off, as I get older. I’m fortunate in that most of my close friends are independent thinkers with their own creative lifestyles, so they generally accept my path without reservation. But the fact is that you and I and others like us occupy a weird niche: It’s likely that we look at spending from a middle-class viewpoint, but at saving/investing from an upper-class viewpoint. (“Class” terminology isn’t exactly right here, but I think you understand.)

      I have had some awkward conversations over the years with some who have a spending level similar to ours, but who would have trouble putting their hands on an extra few hundred or thousand dollars if needed. And I’ve had some other awkward conversations with some who have assets similar to ours, and wonder why we aren’t planning our regular European vacations, or aren’t interested in the latest tax shelters.

      Not being one for confrontation, I generally just mumble something and pick another topic. Early financial independence is an odd place to be, not “normal” by most standards. I’m fine with that. Never quite fit in anyway. 🙂

  15. Really interesting post. I wish I could claim I had the clarity of foresight and the thrifty nature that you have, but sadly I have to admit that I spent most of my life over-consuming along with all my friends and neighbors. I have a blog about it – not sure if its ok to post the url but its

    Basically the moral of my story is that its never to late to start saving and planning for retirement. While I have a long way to go still to achieve the retirement success that you have its never to late to start and information like you provide really helped me make my (late life) course correction!

    Thanks for a great website.

    Steve T.

  16. Darrow- Thanks for sharing some classic life lessons. I forwarded your article to my teenage sons and we followed up with a discussion. They have been hearing some of these same things from me, but getting it from an “unbiased” source really helped. It would be great if you could get this article published in some of the college newspapers or magazines, so that age group could get a perspective different from what they are getting from school. Unfortunately, there is a misunderstanding out there that all is needed is a college degree and the money will flow in. That sets up a lot of frustration when graduates begin to realize that their education/learning doesn’t end when they graduate it just begins. A lifetime of hard work is still the key. Best of Luck, Ed

    • Thanks Ed, this is great to hear. Glad to have your confirmation of these lessons too. I hadn’t expected to connect directly with that age group, but maybe there is a possibility…