The thing about financial independence is that it really boils down to only two main principles:

 

1. Spend less than you earn 

2. Invest the rest somewhat intelligently 

 

From personal experience, it’s not quite that straightforward. 

 

I like to break things down. So after muddling my way through both aspects for most of my adult life, here’s how I’d break down the two principles:

 

Spend less than you earn

1. Track how much you spend

2. Split your pay with intention  

3. Set a savings percentage goal and track that diligently 

4. Save until you have an emergency fund that’s properly structured 

 

Invest the rest somewhat intelligently 

1. Know what kind of investor you are

2. Invest according to your time horizon and risk profile 

3. Diversify as much (or as little) as you need to 

 

I’ve come to realise that it’s usually the lack of clarity or action around one of these sub-points that tends to throw people off track. 

 

For example, more than one friend of mine finds even the idea of investing overwhelming, usually because they're looking at all the various options out there, instead of clarifying their approach first.

 

If they’d think about what kind of investor they are, and how much risk they’d be willing to take, they’d likely realise they would be perfectly fine dollar cost averaging into an index fund and leaving it alone for the next 20 years. 

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Someone else may vaguely know they need to save money, but don’t have a clearly-defined emergency fund, so they keep dipping into their savings which then leads to them never reaching step 2, which is where true wealth building starts. 

 

You might notice I don’t talk about taxes, tax-advantaged accounts, insurance policies or the like, and that’s because these will differ between countries. Of course, there’s room to use all these tools for optimisation, and you should look into them once you get these basics down.