How to Become Financially Independent in Seven Years or Less

You are middle aged. Your net worth is meager. Your income is barely sufficient to meet expenses… And those expenses are going up. The Great Recession is looming. Economists are predicting things will get worse. What can you do?

Should you give up your dream of retiring comfortably one day? Should you accept a future of increasingly meager existence? Should you grow bitter and curse the powers that be for putting you in this situation?

Or should you take responsibility for your situation and make changes

That last question was rhetorical, of course. But sometimes, I wonder if people really do understand their options. There are things that happen in life that we can’t control. But we can control the way we respond to them.

I understand that when you are halfway through your life and are barely making ends meet, it seems like the only chance to become financially successful is to win the lottery (either an actual lottery or the stock market equivalent of one). So it may be frustrating to hear some rich guy from Palm Beach telling you that you can’t quickly turn $25,000 into $1 million by investing in stocks.

But I believe – no, I am certain – that anyone who has modest intelligence and a positive attitude can become financially independent in seven years or less if he or she is willing to work enormously hard.

You do not have to give up on your dream of being wealthy. You always have the ability to change your financial life. It will take a bit of time and patience. And it will require that you change some of the thoughts and feelings you have about wealth and your relationship to wealth.

The first thing you must do is accept the fact that you are solely and completely responsible for your current financial situation. Before you react defensively, read that sentence again… I didn’t say you are the cause of your situation. I said you are responsible for it.

By taking responsibility for your current condition, you also assume responsibility for your future. Nobody can change your fortune but you. And nobody else will. The sooner you accept that reality, the sooner you will shed the anger and blame and begin to feel financially powerful.

I’m not giving you a pep talk. I’m telling you the truth. I’ve done it myself, and I’ve coached dozens of people to do it, too. It is a simple adjustment of your thinking, but it is extremely powerful. It works instantaneously. Without it, you cannot move forward, even by a single inch.

The next thing you must do is set realistic expectations. I’ve had people tell me that they don’t want to make 10% or 15% per year on their money. They think returns like that are “ho-hum.” They want some incredible stock tip or some secret get-rich-quick technique. But when I hear people say that, I think, “This person will never become wealthy.”

Realize that 10%-15% is a high rate of return. Warren Buffett – the most successful investor of all time and the third-richest person on the planet – has averaged 19% on his investments over his entire career.

And realize that the journey to millions of dollars is earned $100 at a time. You must be willing to accept this fact to move your financial life forward. Your financial life is like a train that has stalled. And right now, you want to be driving it at 100 miles an hour. But it can’t go from zero to 100 miles an hour in no time flat. Inertia is against you. Be happy with 10 miles an hour now… and then 20… and then 30. This is how wealth accumulates: gradually at first, but eventually at lightning speed.

The third thing you must do is thoroughly understand the difference between spending, saving, and investing. With every paycheck you get, cover your necessary expenses first (bills, mortgage, etc.). Then put some money toward saving. And then put some money toward investing. Then and only then – after you have “paid yourself” – should you add to your “spending” account.

The fourth thing you must do is recognize that your net investible income (the amount of cash you have after spending and saving) is the single most important factor in determining how quickly you will become wealthy.

Commit to adding to your income with a second income. Make an honest count of the number of hours each month you devote to television and other non-productive activities. Devote them to wealth-building instead. Cast aside the comfortable shoes of victimization. Put on the working boots of a financial hero.

It’s not fun to realize, in the midst of your life, that you haven’t acquired the wealth you want. But the good news is your past doesn’t have to be a prologue… unless you allow it to. You can change your fortunes today by doing the four things I’ve just told you to do.

You are only 47, not 87. You have plenty of time to increase your income and grow your net worth. Why do you assume all is lost when – as any 87-year-old will tell you – you have a whole wonderful life ahead of you… a life that can be rich in 100 ways?

[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]