However, what I want to write about here is the concept of being frugal. It seems to me that the real key to success is, ultimately, not how much you earn but how much you keep and don’t spend. Sure, it doesn’t hurt to earn a high salary. But all too often, I see some individuals caught in a vicious cycle. They earn a substantial salary, and as a result buy pricey toys: Cars with high monthly payments, brand new stereo systems, and so forth. As the credit cards and car payments go higher, the individuals are forced to work longer hours. And what is there to show for it?

What I found to be a much wiser course, in my opinion, is to be much more frugal. As someone who used to spend over $10 or more on coffee a day, I have completely cut out this habit. What justifies me plunking down my hard earned cash for a $4 cup of coffee? The ambiance? It’s really not worth it. Besides, I can create my own ambiance by brewing my own coffee, then enjoying it knowing that I paid a fraction for that cup of what I would have paid had I gone to one of those coffee shops.

Now that I am much more conscious of my finances, I am sometimes shocked at what I used throw money away on! Since music is a hobby of mine, I recall buying the latest electronic keyboard then selling it for half price 6 months later. It wasn’t until I had lost several thousand dollars in the process that I wised up.

Still, better late than never. The journey towards financial independence requires a conscious effort. More than just financial independence, I find that living frugally helps me be more in-touch with the world around me and not just be a consumer.

I have seen people who have had it all, so to speak.  Despite their vast amounts of wealth, some of these people weren’t overall happy with life.  They seemed to be in a constant race of attaining more wealth, never truly satisifed with what they had.  This observation lead me to decide that, above all else, one should be grateful and fortunate for what one does have on a daily basis.  This is not to say that you should not strive to attain goals and dreams of becoming financially independent.  On the contrary, it makes the attainment of this eventual goal all the more pleasant.  It isn’t the destination, but the journey.  How will each of us make this journey to financial independence? Will we try to take shortcuts, cheat, and use unethical means? Or will we strive to be the best person we can be, creating positive growth in our lives and in our careers or businesses?

I recently read a very insightful article by Steve Pavlina titled “Career Responsibility“.  In this article, Steve writes, “When choosing a company to work for, to partner with, or even to patronize as a customer, take a moment to consider the values you’re supporting and the long-term consequences of those values.”  I find a great deal of wisdom in this article and in that sentence in particular.  Each of us creates our destiny, and ultimately are responsible for our actions.  I for one want to be proud of my achievements when I attain the eventual goal of financial independence.  When I have achieved my goal, I want to be able to look at myself in the mirror and say to myself, “You did it - Not by standing on the backs of other people, but by pursuing your dream while at the same time creating something of benefit for the world.”

Having read several books on the topic as well as having talked to successful people, I have determined for myself that the common theme among those who are financially independent seems to be that they are, for the most part, frugal people.

It does not take an expert researcher to figure out that we live in a consumer society. Everywhere you turn, you are being offered the latest, greatest thing to spend your hard-earned dollars on.  The question is - Do you really need it? In my case, the answer is almost always “NO!”.  I have not always been this way; I recall a time when I, too, used to spend money on things that I really did not need.  For me, the items in question were musical instruments.  I would spend $1000 to $1500 on the latest musical keyboard, only to sell it on eBay 6 months later for 1/2 or 1/3 of that price.  Where is the financial wisdom in that?

Having spoken with those who are successful, I have come to the conclusion that in order to eventually achieve financial independence, once must make every attempt to keep unnecessary expenditures to an all time low.  This does not mean you should deny yourself everything and count every penny.  What it does mean is that a more enlightened approach to understanding where one’s money goes and thereby curtailing the purchase of things we do not really need is a big step towards the ultimate goal of financial independence.

Let’s take automobiles as an example.  Some people such as myself buy an automobile to take me from point a to point b.  For others, an automobile is a status symbol - One that requires a lot more financial upkeep and maintenance.  I am not suggesting that one buy a 20 year old clunker that doesn’t even make it off fo the dealer’s lot.  However, with so many good, reliable automobiles these days selling for a very reasonable price, why would I spend thousands of dollars more? I think it is by far more impressive and wise to set aside the money that would have been spent on this more expensive car on an eventual down payment on a property instead.

I enjoy cultivating the discipline of requiring myself to be frugal and spending wisely.  It helps me understand where my money is going, even when I do not always do the right thing and do purchase an item I may not need.  Understanding my spending habits is a big step in the right direction.  Being aware of what I am spending my hard-earned dollars on is essential in my goal towards financial independence.

It does not make sense to throw away money on high credit card APRs. At the earliest opportunity, I opened a couple of 0% introductory APR credit cards and transferred the majority of my balances over to them. In most cases, these credit cards offer an introductory APR of 0% for the entire year - More than enough time to allow me to significantly reduce my credit card balances without feeding them outrageous percentage rates.

However, after I had transferred the majority of my debt to these 0% APR cards, I still had approximately $5000 that was sitting on a high interest credit card. Looking at one of my available credit cards, I noticed I had an offer from my Discover Card featuring 7.9% APR + the balance transfer fee (In this case, it was 4% to a maximum of $99). The card that I had $5000 on had an APR of 22%!

Let’s look at some numbers here to see just how much money would be thrown away on the higher balance credit card:

Transferring $5000 to the 7.9% APR credit card translates to the following numbers: A one time fee of $99 + $395 in interest for the year (7.9% - Keep in mind, I am not taking into account the monthly payments that would subsequently reduce this balance along with the associated interest rate. To keep things simple, let’s just use the interest for the year that would be owed at that percentage rate).

Now, take a look at the interest for the $5000 had I kept it on the 22% credit card: $1100!

So, just by transferring my account from a 22% interest rate card to a 7.9% interest rate card, I am saving approximately $600 a year!

As I mentioned, these are not exact numbers - This is not taking into consideration the balance that would be reduced along with each payment.. But you get the idea.

WHY pay these guys more money than you have to? Paying down or paying off high balance credit cards first, or transferring those balances to lower or 0% APR credit cards is an essential step for me if I am to one day achieve financial independence.

Ideally, I should not have any balance on any credit card. But the reality is, I do. To deal with this reality, I have to do all in my power to see that my balances are paying the lowest possible APR.

Why pay more for the same item when, just by doing a few minutes of research, you can save tens or even hundreds of dollars? Achieving financial independence involves the wise use of one’s money; One such wise use is not paying more than you have to.

Instead of cutting out going to coffee shops entirely, I will limit myself to getting a coffee on a special occasion - Say, on the Friday at the end of a work week in the evening, and maybe one more on the weekend.  To those who buy 3-5 coffees a day, this may sound absurd - But I was one of those people who would buy 3 or 4 lattes in one day.  4 lattes! That’s around $16! Multiply $16 by 365 days and you’re spending $5840 a year.. on coffee!

That’s the same coffee you can make at home! Yeah, I know - “It’s the ambiance“. I’m not paying $5840 a year for that ambiance anymore.  A latte here and there is okay for me - But not 3-4 a day.

Look at it this way; With all of the money you save not spending on lattes, you can actually buy stock with the coffee company instead.

It is my firm belief that a quest towards financial independence must also include improving one’s mind, body, and spirit.  This is not optional; It is vital.  What is the point of being rich if you are going to be too sick and stressed out to enjoy it?

As someone who in his earier years grew up on all sorts of junk food, I am convinced that you really are what you eat.  I noticed a profound change in myself over the years by switching from unhealthy foods to ones that are healthier for me.  Don’t get me wrong - I am not advocating drastic measures such as chewing on alfalfa sprouts and not ever having so much as one cup of coffee ever again.  However, personal responsibility in taking care of one’s mind, body, and spirit is essential, in my opinion, to overall financial independence in the future.  Think of all the money you will save on those expensive restaurants and medical bills.

While we cannot predict what the future will bring, we can at least make an effort to improve our own personal well-being.  It is not only the financial gain, but the quality of life to be able to enjoy those gains that is important.

Time and time again, I am surprised by those who are truly wealthy and those who would have you believe they are, but are just putting on a show. The wisdom of those who are more quiet about their success becomes apparent when you observe their actions. Would they rather put their wealth into a $90k car to show to the world, or perhaps the money would be better spent elsewhere – Such as in a real estate investment or mutual funds?

A fascinating book that touches on this topic is The Millionaire Next Door. For example, on page 40, authors Thomas J. Stanley and William D. Danko state “They [The Affluent] became millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way.” I find this statement to be right on the money so to speak, looking back at my own actions in the past. The me of yesteryear would spend, spend, spend! Although different people have different fancies, my particular one was spending money on new musical equipment, only to resell it at half the price or less at a later date. Not only was this not financially wise, but it was also a profound waste of time.

I have just finished reading this book and have gained very valuable insights as to those who are financially independent. I will share more of what I have learned from this book in the articles to come.

I have noticed that when I pay cash for a purchase, I am much more financially conscious of my actions. When using cash, I more frequently ask myself questions like, “Are you sure you can afford to by this now?”, “Isn’t this a bit too pricey?”, “Wouldn’t you rather save your money?”

When you are forced to open your wallet and physically take out the ten, twenty, or hundred dollar bills to pay for a purchase, you quickly become very financially conscious. You tend to spend less and save more.

Once I have paid off all of my credit cards, all of them except for one are going into the shredder. The one that I will keep will not be carried with me either; It will be left at home. I am even questioning whether I will keep the remaining card, since a debit card has all of the benefits of a credit card without the risks.

Consumer debt is the biggest obstacle to achieving financial independence. I have made my share of mistakes - Costly mistakes which I am now working hard to pay off.

Currently, I am approximately $23,000 in debt. Over the past several months, I have managed to move most of this debt to 1-year 0 balance introductory APR credit cards. This of course means that, for as long as I make my minimum payment on time, I will not have to pay the finance charge for these cards.

Right now, my primary focus is the total elimination of this $23,000, and I will keep you posted throughout these “Financial Milestones” as to my progress.