Original question from Quora:
What is the best route (or tips) for a 25-year-old to become financially independent?
There are a million “tips and tricks” to find financial independence, but it doesn’t matter your age we all have to learn the same lessons.
Let me tell you the story of Sam. Sam was a talented software developer who graduated college and took a job making $25,000 a year. It was an awful job. he worked 60 hours a week and his boss treated Sam like crap.
Sam was married and his wife was still in school. They were barely getting by and racked up debt. They were smart enough to be frugal enough to get by, but they weren’t getting ahead.
After six months of hating his job (and his life), Sam got a better job as a software developer for a stable employer with good benefits. He got to $35,000 a year and in a couple years worked up to making $45,000 a year.
With the extra income, Sam and his family’s lifestyle improved and a few years later they welcomed their first child into the world.
Sam continued to move up in his career every few years until he was making over $100,000 a year. That sounds like a lot of money, but it wasn’t.
Every year, more debt was added to the pile to support Sam’s lifestyle and no matter how much he made, he always felt like he had to make more to “get ahead”.
Sam was running on a hamster wheel and didn’t know how to get off. Maybe the system was just rigged against him?
And it was. Well not “THE SYSTEM” so much as his brain, and his wife’s brain, and everybody’s brain.
See, when there are resources available, people find ways to use them up. You know this is true because you’ve seen others do it and you’ve done it yourself right?
For example, every time you have a deadline, the work is never turned in until right at the deadline. In fact, without a deadline we rarely get anything done at all!
We think this only works with time, but Sam realized that money is the same way. If we have bills to pay, we find a way to pay them. Whatever is left, we find reasons to spend it.
If saving money was a bill, Sam would be able to pay it right?
That made sense to Sam, so he did a simple budget and realized he had at least $2,000 a month of “free cash” every month that managed to disappear. That’s crazy!
So, Sam did something crazy to fix the problem. On every paycheck, he paid all of that month’s bills right away, even if they were almost a full month early. He wanted the money out of his account.
Then he did something weird.
He took the rest of the money and threw it into a savings account. He left a few hundred dollars to pay for odds and ends, but he wanted to feel “broke”.
Obviously he wasn’t broke, but by feeling like he didn’t have money to spend, he just didn’t spend so much money. Perhaps it was just crazy enough to work?
Sure enough, Sam found that he had even more than $2,000 a month he could live without and before long he had quite the cushion of savings.
After he built up his savings, Sam would take chunks of the saved money and pay off entire credit cards.
In a couple years he had paid off all his credit cards and had over $15,000 in savings. Even more than that, he was now putting over $3,000 in savings every month!
A few years later, Sam’s house was paid off and he was for all intents and purposes, debt free.
In that same period he worked his way into upper management and was making over $150,000 a year.
But then Sam noticed the strangest thing. All the people he worked with in upper management, even those at the top of the business making millions of dollars were all stressed about money.
When Sam asked them what was wrong, they told him the same story, they were up to their eyeballs in debt and didn’t know how to fix it.
At first, Sam tried to help them by explaining what he did, but soon realized that didn’t work. What he did made no sense to them because they were so busy trying to maintain their life and careers they couldn’t fathom they were in their own way.
He was casting pearls before swine.
So if you want to be financially independent heed the lesson that Sam tried to teach others. It takes more than just making more money to become financially independent. You have to know yourself well enough to realize that you will spend the resources if you have them.
Save your money and put it aside before you have a chance to spend it. Pay off your debts and avoid new debts. If you do those things, the more money you make, the more financially independent you will be.
It’s not rocket science, but if you don’t know the secret it might as well be.
P.S. I unpack more ideas in Creative Genius.