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Written by: Corey Janoff

People are always big fans of lists.  I’m not sure why.  There is probably some psychological reason behind it.  Maybe we have a fascination with numbers and order.   

It is also timely as we enter the holiday season. Grocery lists, list of family events to attend, naughty/nice list, etc. Since we love lists so much, let’s add another list to be thinking about: The list of 5 steps to put you on path to achieving your financial independence.  

If you can complete these five steps, you are giving yourself a great chance at achieving your long-term financial goals.  In no particular order, here are the five things I encourage everyone to consider doing to get on track to be financially independent one day.   

Listen Here!

1. Save 20% of Income for Retirement 

If you have read any of our previous blog posts on retirement savings, you have probably seen this one before.  You may have seen other common recommendations to invest 10-15% of your income for retirement.  I think that is too low.  The reason why I think 10-15% isn’t enough is because that assumes you start working and saving that much in your early 20’s and you continue working into your mid 60’s.   

In reality, most people don’t really start taking their retirement savings seriously until they are settled into their careers, often in their late 20’s or early 30’s (or later).  Also, the average retirement age in America is 62.  Not 65 or 67.  Roughly two thirds of people are retired by age 65.   

Some of this is due to factors outside of their control.  Health issues, unproven age discrimination, etc.  We all know age discrimination is illegal, yet employers still do it.  It makes sense.  Why would an employer pay a hefty wage to someone who is mailing it in at the end of their career when they could pay half as much to someone half the age who is hungrier and harder working? 

Assuming you haven’t consistently been storing away 10-15% of your income at age 22 and that we don’t want to bank on you working until you are 67, saving 20% of your income should put you on a decent track.   

We have done the math enough times and found that if you save at least 20% of your income starting in your early 30’s, that should put you on a good track to be able to retire by your early 60’s and allow you to live a comfortable life in retirement without running out of money.  When I say comfortable, I mean a similar lifestyle to the one you grew accustomed to living while working.  Not guaranteed of course.   

Who knows what investment returns you will achieve, or what future taxes and expenses will look like.  If you live to be 110 years old, saving for 30 years may not be enough to support your lifestyle in retirement for 50 years.     

Save more if you would like, but generally, I would start with at least 20%.  If you don’t like that idea, then you probably won’t like some of the other steps I have lined up… 

If you have questions about your financial situation and would like to speak to one of our independent financial advisors, please reach out to us and we would be glad to connect. 

2. Avoid High Interest Debt / Pay Off Debt Aggressively

There is no better way to throw money away than paying interest on debt.  Especially debts that aren’t tied to an appreciating asset.  I’m not suggesting you should avoid debt completely, nor am I suggesting that if you have any debts at all you should live in a cave and do nothing except eat top ramen until you are debt-free.  That would be impractical and probably limit your ability to achieve other financial goals.  We just need to be judicious with our debts.   

Should we pay $10,000 for a European vacation with a credit card that we won’t be able to pay off by the next billing cycle?  Absolutely not.  If you don’t pay off your credit cards in full each billing cycle, cut them up and throw them away.   

Is it justifiable to take out a 30-year mortgage to purchase a house?  Of course.  Although, read my next step before you buy the house.   

I don’t know many people who can afford to pay cash for a house.  Also, real estate is generally an appreciating asset, meaning its value will likely increase somewhat over time (no guarantees of course).   

I want people to avoid high interest rate debt or pay off high-interest debts as soon as possible if they have them.  What is considered high interest?  Depends.  I like to say, if you think you can do something else with your money that is more productive for your long-term financial success, then we may be fine stretching out payments on that debt.  If you don’t think the benefit of doing something else with your money will be greater than the interest you are paying on the debt, then pay off the debt.   

The credit card is an easy one.  Most credit cards have interest rates above 15%.  Could you invest your money elsewhere and receive the equivalent of a 15% annualized return?  Probably not.  Pay off the credit card.   

On the other hand, if you have a car loan at 1.9% interest and you are not currently saving at least 20% of your income for retirement, then maybe we should put the extra money towards retirement. Since we generally are confident you will obtain a greater long-term return on your retirement savings dollars than very low interest rate debt, like this example here, it may make sense to make minimum payments on that debt indefinitely and save more for retirement. More on cars in a little bit.   

Everything is case by case, but the higher the interest rate on the debt, the more I want you to punch it in the face and get it out of your life.   

Now, with the low interest rate debts, if you are on track to achieving your other financial goals, it could be a good idea to pay extra on those.  I don’t know anybody who ever regretted paying off debt.  Psychologically it feels great.   

Most people are emotionally debt averse and would prefer to be debt free in a perfect world.  So, let’s placate our emotions and tackle those debts.  Once we are debt free, we can put even more money towards our other financial goals and become financially independent even faster. 

financial independence

3. Keep Your Mortgage Below 2x Gross Income

You can absolutely buy a house that is more than two times your gross household income.  Heck, a bank will probably approve you for a loan that is 4-5x your household income!  But you are reading this article to find out what steps you need to take to become financially independent.   

Let me rephrase that.  You can buy a house that costs 4x your income.  You will just want to put a 50% down payment in order to stay on pace to achieving financial independence.  Keep the mortgage balance under 2x your gross household income.   

I’m reluctantly OK with 2.5x in some cases.  If you’re single with no kids and don’t have any student loans, then we can bend the rules a little bit.  Kids cost a lot of money.  I have two of them and they don’t even eat a lot yet.  Can’t wait to see the grocery bill once they are teenagers.  How much does it cost to be on the traveling soccer team?   

It’s pretty simple.  Your housing costs will likely be your largest expense in your life.  The less you can spend on housing, the more likely you are to achieve financial independence.   

I’ve seen enough people’s finances to tell you that most people who carry mortgage balances that are greater than 2x their income struggle to be on track to accomplishing their financial goals.  The ones who spend less than that usually do a much better job.   

If you have questions about your financial situation and would like to speak to one of our independent financial advisors, please reach out to us and we would be glad to connect. 

4. Spend Less than 1/5 of Your Income on a Car

Cars have gotten expensive!  You can buy as much car as you want.  But, if you want to be financially independent one day, try to spend under one fifth of your income on a car.  If you earn $100,000, spend less than $20k on a car.  If you earn $200,000, spend less than $40k.  Etc.   

Why 1/5?  Math.  Assuming you finance the purchase, the monthly payment on a $40k car will be around $720/month on a 60-month loan at 3% interest.  $740/month at 4% interest.  

If you are earning $200k/year or more, that is manageable.  Still a large expense, but it’s doable.  You are probably pocketing around $10k/month after taxes.  If you follow my mortgage advice, your house payments probably total around $2,500/month.  You’ll still have money left to cover groceries, utilities, insurance, and save for retirement.   

If you earn $100k/year, your take-home pay is probably a little over $5k/month.  If you have a $740/month car payment, about 15% of your paycheck is going to wards your car loan.  And you still have car insurance and gas on top of that!  In total, your car probably costs around $1,000/month to drive, leaving only $4,000/month for EVERYTHING ELSE!  Housing.  Food.  Student loans.  Retirement Savings.   

I get that new cars are expensive.  If the new car price tag is more than 1/5 of your income, look for a used one.  Or lower your expectations.  Instead of looking at Audi’s, look at a Kia.  Get the entry level model, not the supped up one.  Air-conditioned seats are nice in the summer, but not mandatory.  Find one that is 7-8 years old and you should be able to get the price point where you need it (if not well below).   

steps for financial independence

5. Insure Against Catastrophes 

We can do everything in our power to be on track for financial independence, yet we cannot avoid unexpected events throwing a wrench in our plans.  If we have the proper insurances in place, we can hopefully weather those storms.   

The big things that most people should insure for are medical expenses, death, disability, and lawsuits.   

We can’t avoid every possible disaster, but the big four above should take care of the majority of things that can derail a financial strategy.   

Most people are aware that medical expenses are very costly without health insurance.  Heck, they’re even costly with insurance!  Make sure you have health insurance.  Most people don’t argue that one. 

If you have a family, life insurance is a must.  Now, due to medical underwriting requirements, not everyone can qualify for a life insurance policy.  However, some employers offer the ability to purchase life insurance through the benefits package at work without medical questions.  If you have people who rely on you in your life, assuming you can qualify for life insurance, get it.   

Disability insurance can provide income to you and your family if you are unable to work for an extended period of time due to injury or illness.  If you incur a long-term disability during your career (and the odds are about 25%), that could really screw up your ability to achieve financial independence if your income is reduced or eliminated.  Similar to life insurance, disability insurance requires you to be somewhat healthy to qualify.  Assuming you can qualify, get a policy to protect your income.   

Lastly, lawsuits can set you back considerably.  If your occupation requires some form of professional liability insurance, obviously you should carry that.  On the personal side, there are a few things you can do to increase your protection from personal liability.   

Increasing the liability limits to the maximum levels on your car and homeowner’s insurance is an easy first step.  You are most likely to get sued personally from a car accident or injury to someone on your property.  A nice supplement to those policies would be to add an umbrella liability insurance policy.  This adds an additional layer of protection above and beyond the limits on the home and auto insurance policies.  It can be purchased through the same company as home/auto insurance and is usually pretty inexpensive.   

If you have questions about your financial situation and would like to speak to one of our independent financial advisors, please reach out to us and we would be glad to connect. 


I never said this would be easy.  Think of it like getting in great physical shape.  Like to the point where you can complete an ironman and are comfortable wearing a bathing suit in public.  It’s going to take hard work and discipline.  You can’t just read a list of what to do and then flip back over to Netflix with a bag of Cheetos.   

You actually have to do the work and keep doing it over and over again.  This isn’t a diet that you do for 30 days and then go back to eating what you usually ate before.  This is a lifestyle you have to adopt.  Once you get used to it, it becomes second nature and it’s really not that difficult.  The hardest part is making the changes if you haven’t been living this way already.   

If you’re up for the challenge, you can do it.  Everyone can do it!  You just have to decide if you want to make sacrifices now so you can be financially independent in the future.  The alternative option is to live it up now and make gigantic sacrifices in the future so you can afford to live the rest of your life without running out of money.   

There is no right or wrong way to go about it.  But if financial independence is a goal, then these steps are a good starting point.  

If you have questions on your specific financial situation and the ways you can get yourself on track, please reach out to us and we would be glad to set up an initial meeting. 


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