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Financial independence is a tricky phrase because it can mean different things to different people.

Right now, I view financial independence as being a state where I no longer have to work for money. Yet, seven or eight years ago, I might have viewed it as simply being free from worrying about my next paycheck. At different points in there, I might have seen financial independence completely differently.

Along the way, I’ve come to realize that financial independence is made up of a series of stages. Some people might see more stages, while others might see fewer; I see four clear ones.

In my own financial journey – and in the journey of others that I’ve had conversations with – “financial independence” generally means the next stage that hasn’t been achieved yet.

Three weeks ago, I shared with you the first third of my favorite essay of all time, Self-Reliance by Ralph Waldo Emerson. Self-Reliance has profoundly affected my life in countless ways, and I find myself re-reading it every month or two. Each time I read it, it reveals something new to me, giving me something to think about.

The original essay, published in 1841, outlines the value and need for each of us to follow our own path in life, one that relies mostly on our own efforts. It’s a call to do our own thing and to focus our energies in making our lives as independent as possible so that there are minimal consequences for doing our own thing.

My primary financial goal is what I call financial independence. Though financial independence can have a number of meanings, I define it as being a state in which I no longer have to actively work for money and my savings and investments cover all of my needs and reasonable wants for the long-term future. In other words, I live off of part of my investment income, with the rest being channeled back into investments so that the system is sustainable even with inflation.

Naturally, one key part of achieving this is to reduce my expenses as much as possible. If you spend less, then you have more to invest. The more you have to invest, the quicker you reach a point where your investment income is covering your (lower) expenses.

So, how do we do that without making life miserable?

One of the first pieces of financial advice that most people receive is that they need a budget. Budgets are indeed powerful tools, but there are countless budgeting systems out there, and, frankly, not all of them are right for everyone. Almost every budgeting system has some stellar features paired with some drawbacks that make […]

The post How to Choose a Budgeting System That’s Right for You appeared first on The Simple Dollar.