9 Steps to Get Started With Financial Independence

Let’s get back to basics for this one on where and how to get started with financial independence. Due to reasons that will be clear in my next article, I’ve been inspired to look at the beginnings of my financial independence progress and journey. For long-time readers, this will be a great touch-base. For new readers, this will be a great place to start for finance-related New Years resolutions.

Guides like this are helpful no matter where you are in your progress towards financial independence. I still find myself referencing this logical chart, courtesy of r/personalfinance, that I first looked at in 2016. That one is helpful for starting out reaching financial stability, admittedly different from financial independence. For the latter, the very first step is inescapable:

Step 1. Write down your goals and dreams.

The more specific, the better. If you already know what your goals and dreams are, this step will be the easiest. If you don’t, now’s a good time to figure it out. Put it in writing. Make it realer.

I first wrote down my life goals and dreams in late middle school/early high school. In 2016, I made a more formal document on what I wanted to learn, what I wanted to do, and a very rough timeline of when I expected to accomplish that. I made this before learning anything about financial independence, so, when I started conceptualizing those FIRE lessons, that doc was a perfect guide to my first steps.

Future impact:

Ten years later, it comes as a surprise to see I wasn’t that far off at all with the final addition to that timeline; which was, copy/pasted directly: “GO ON BOSS-ASS TRIP AROUND THE WORLD WITH SAID MOOLAH (say, 2023-2025)”. I did take a month out of 2023 to travel Europe, which was a sequel to the monthlong trip to Europe I took in 2022. In 2026, I have enough to travel indefinitely, if I so choose.

Step 2. Start tracking what your money is doing.

In my case I use credit/debit cards for all of my purchases, so if they’re connected to tracking software like Credit Karma or You Need a Budget, this is easy to do. You basically want data of everything you spend money on – and earn – for at least 3 months. The more the better since there’s things you only spend during certain times in the year (like heat in the winter or holiday gifts for friends) but 3 months is the minimum. Having this data is essential for the next step of the process.

Note that this is NOT the time to start tweaking your spending habits. This is the time to just have a running record of how much money you consistently make, and how much money you consistently spend. Holding off on regular purchases to make the numbers look nicer is going to backfire. This isn’t a test, and we’re not here to judge your financial choices. Just put together the amount of money you’ve made, you’ve spent, and spent on what, for at least 90 days.

Future impact:

In any sport you pick up, you have to learn the basic moves before advancing to the moves that leaves the bleachers cheering. That’s what this is! Once you get used to tracking what your money is doing, you’ve got the foundation down for your future millionaire self. That future is where you’ll track what your money is doing as investments, beyond your spend.

Speaking from experience here: I now have enough money invested that I may gain over $1,000 in one single day of holding that investment. All the market needs to do is grow a sixth of a percent (0.1667%) and my net worth is now that much higher with little work on my end. Thanks to this step, I have the skills needed to track this and understand how consistent it is.

Step 3. Analyze what you’ve spent.

You might know you pay quite a bit for gas, but never wrote down how much you spend on it per month. Ditto for self-care purchases, or work lunches, or the ever-dreaded coffee run. (Pause for the people still screaming about expensive lattes.) Compare the amount you spend with how much you save.

For a very few (like me in 2016) you might be saving too much; you’ll know this by the amount of financial anxiety you have and how your life is so bare-bones it’s no longer enjoyable. It’s much more likely you feel you’re saving too little. If that’s the case, you have two options ahead. Spend less, or earn more. You can choose one, or both; ain’t no limitations here, since you get to choose what actions you take.

Future impact:

As alluded to above, I actually started budgeting to help myself spend money more freely; I was raised to be financially anxious to the extreme, so seeing how much I was spending over several months proved there was room for more than just bare survival.

Step 4. Spend less/earn more/both.

This is the epitome of “easier said than done”. I have a 4 part series on getting a high-pay job which, you’ll notice, doesn’t tell you a timeline. It could take several months, or even years, to secure that high-pay job on the fast track. Even when better-paying jobs were rife just a few years ago, it could still have taken weeks for a talented candidate to get an offer letter. The non-guarantees aside, it’s no secret that the more you earn the better. That’s the reality of living with capitalism: your path is so much smoother when you have more than enough income flowing in.

Alternatively, spending less can be the easier path since you have a lot more control over what you spend; it’s not required for someone else to be involved in your spending as it is with you earning. To do this, setting up a budget works best to keep you on track. There’s several strategies out there; if one doesn’t work for you, do your research until you find one that does.

Future impact:

I am jabbing my pointer finger into my own chest. You can see from past financial reviews that I went hard on the “spend less” option in 2017 and spent about $1,100 a month. That was the same year I nailed the “earn more” option by going from a $40k salaried job to a $60k one; in 2019, I jumped ship again to an $86k one, which rose my total comp to $131k six years later. Spending less kept me level-headed about my financial habits; earning more let me build wealth much faster than I would have otherwise.

Step 5. Build an emergency fund.

This can take a few different forms. Once you have enough savings you want to be sure NOT to invest what you’d need if something happens you can’t prepare for. Car repairs, hospital visits/stays, and losing your job fall under this category. Yes, you want to start investing as soon as possible at your age. At the same time, you need to ensure you don’t touch your investments this soon.

How much should you save for your emergency fund? You’ll want enough to cover 3-6 months’ of expenses. For the last year I’ve had at least $10k in cash at all times; in the past, that hovered between $5k and $6k. At the absolute, bare-bones minimum, you’ll want $1,000 in an emergency fund. This fund can just be a regular savings account.

The point of it is that it’s money you can spend on any emergency immediately. You don’t have to wait until someone can come buy a valuable possession off you, or wait the 3-5 business days it may take a software system to process. Mine is with Ally Bank; should I ever have to take care of an immediate and unexpected need, I can swipe my credit card or write a check without worrying about how much of my paycheck this will eat up.

Future impact:

The best case scenario that you never need to dip into your emergency fund and let that cash laze around. Lucky you; go buy a lottery ticket. The MOST LIKELY scenario is that you WILL need to expect the unexpected and build that into your financial independence planning.

I built my own emergency fund despite impressively good health and a tendency away from death-defying hobbies; nevertheless, the emergency fund came in clutch multiple times over the course of my 20s:

• The time I got hit by a van while riding my bike and visited the ER for X rays
• The time a family member crashed my car in another state and I had to figure out towing and expensive repairs
• Also, the time I fell behind on a multi-day road trip and needed to either rebook my hotel stays or sleep in my freezing cold car

Emergencies already suck. Removing the financial element completely will make it that much easier to deal with. Plus, being able to deal with the emergency, from a place of financial strength, prevents even worse consequences in their tracks. You don’t need to put off getting those X-rays, picking up your car, or risking zero sleep in an unfamiliar place. Now, you can handle the emergency with much less stress, and then continue on. The most you need to do after the emergency’s taken care of, is rebuild your emergency fund and get used to life post-emergency. Yay!

Step 6. Learn about investing.

This step took the longest amount of time for me. The easiest part about investing is learning about the brokerage businesses you will work with to actually make your investments. I use Vanguard for my taxable account and Fidelity for my Roth IRA and HSA; both are great options and I haven’t had issues with either. I’ve also heard good things about Charles Schwab, but haven’t used them personally.

Once you know who can help you invest, it’s time to learn how to invest. See here for a quick guide on investing terms I’ve written previously; you’ll want to know the terminology so you won’t confuse one thing for another. Example: there are different types of assets you can invest in; stocks, bonds, and real estate are the most common ones.

Based on the understanding of your goals you got from Step 1, you can choose which specific assets are right for you. If that’s a portfolio made up of mostly stock, great. Then it’s time to get familiar with portfolio options. Some folks (like me) are almost completely in to stock market index funds. Others like the 3 fund portfolio, or the 4 fund portfolio, or whatever other mix makes them feel the best. The more you learn, the more powerful your eventual choice will make you.

Future impact:

This will inoculate you against bogus investment offerings and trendy assets that, ultimately, will not serve you well.

You’ll want to keep a few statistics about investing in mind. The ones that most interest me are:

• 80% of investment managers fail to beat the total stock market
• The total stock market sees 10% returns per year, once you calculate the average returns historically

Therefore, a return equal to or greater than 10% is a great measuring stick to determine how well chosen your investments are.

Step 7. Choose the best long-term investment option.

The FIRE movement makes this especially easy with the suggestion of index funds. Index funds are essentially nothing but pros:

• The lowest fees in the investing biz, meaning you keep more of what your investments earn
• The closest you’ll have to a guarantee of double digit returns (10% returns are the historical average)
• Built-in diversity. If one industry happens to tank, you’ve got investments in other ones that keep you in the black.
• Once you purchase, you don’t have to spend any time trying to time the market and selling at a high. You’re investing in the entire market. It goes up every year on average. You don’t need to time the market because, after enough years, that’s going to be at a much higher price than when you first bought it.

As a beginner, it’s very hard to go wrong by starting out with total market index funds. Vanguard’s are VTI and VTSAX, Fidelity’s are FSKAX and FZROX, and Charles Schwab’s is SWTSX. You can always start investing in something else later if you find something else in your research.

Future impact:

How else will you feel confident in your investment decisions, if not by understanding which options will work best for you? Choosing the best long-term option for myself – via index-fund investing – made it so I could simplify my investment management with a strategy that beats 80% of investment managers.

It also prevented me from panic-selling my investments during big events, like coronavirus shutting down businesses in 2020 and Trump yapping about tariffs in 2025. My money always got to take advantage of stock market rallies; in the last three years alone, my investments had a 70% total return. I won’t see that insane of an investment return every three years, but I sure got to see it today thanks to choosing the best long-term option.

Step 8. Fund an investment account.

To “invest” in something means you’re actually purchasing something you expect will be worth more in the future. When you set up an account with a brokerage like Vanguard or Fidelity, you can then buy a slew of different funds, individual stocks, and other assets. There are different types of investment accounts you might choose; personally, I started off with a taxable account and a Roth IRA account. Whatever you pick, set up a money transfer from your bank account to your new brokerage. After that money hits your account, choose which index fund(s) you’re dumping that into and monitor periodically.

Note: you need to hit “buy” on whatever specific investment you choose to actually start investing. Your money, once it reaches your investment account, is not automatically applied to an investment. There is no default, other than a money market account where your cash just sits there. I repeat: there is no default investment. Adding money to an account without doing anything with it does nothing.

Future impact:

The earlier you start index fund investing, the more time your money has to grow and grow and grow. I started investing when I was 22 years old; I’d go on to have $100k to my name at 25 years old and $700k at 31 years old.

Step 9. Check in on your progress regularly.

This can be daily, weekly, monthly, bimonthly, quarterly, or in accordance with ancient pagan measurements of time only you still follow. As long as you review your finances consistently, you can ensure it’s still working for you.

You’ll need to do this anyway on the off-chance a bad actor hacked your accounts or a software error tweaks something it shouldn’t. It’ll also help to watch how much better your portfolio does when you’re not touching the money. It’s for good reason that the investors who see the highest returns are dead: because they’re not trying to buy or sell their investments at the perfect time.

It’s good to monitor your gains and losses now for your future self. Get good with stomaching market downturns. Inoculate yourself against selling – you need to care more about time in the market, not timing the market. Also get good with not touching the money. Don’t dump it all into hot stocks or, god forbid, crypto. Your time-in-the-market strategy is useless if you flit from one declining stock to the next, and there is zero way you’ll know it’s declining until it’s too late to recoup your investment. That being said, it’s good to keep abreast of how things are going. In market upswings, that’s one hell of a mood booster.

Plus, who knows what the future holds? You might find yourself dealing with a disability some years from now, or the serious consequences of fascism much sooner than that. Plans must change to accommodate new circumstances. By keeping abreast of your progress to financial independence, you can also make any changes as absolutely needed.

Future impact:

No need to remain in the dark about your finances. With this step, you’re captain of your own life. You can handle whatever life throws at you – at least, you can handle it with more skills and resources than most. Godspeed on the rest of your life!

Cover image credit: Ashraf Ali via Unsplash