Key Point:

Getting a handle on your finances comes down to one basic principle: follow the math. That means ignoring feel-good advice like choosing to study a subject you love rather than one that will bring in a salary you can actually live on. It also means bucking social trends if they’re not right for you. Crunch the numbers and you might just discover that you’re better off investing your savings in the stock market rather than buying a house and saddling yourself with a lifetime of debt. Why? Well, if you’re growing your money while avoiding ruinous interest rates, you’re setting yourself up for financial independence. And that means you’re one step closer to the ultimate dream: early retirement. 

Financial independence is a term that describes the ability to live comfortably without being dependent on a paycheck or traditional employment. Achieving financial independence requires a combination of smart decisions, hard work, and a commitment to living below your means.

You're more likely to make sound decisions if you follow the math rather than your passions. Emotions can often lead us astray when it comes to financial decisions. It's important to approach financial decisions with a clear head and to base them on facts and analysis.

Debt can be a significant obstacle to achieving financial independence. It's important to live below your means, pay off debt as quickly as possible, and avoid taking on new debt whenever possible.

Consumer debt is a financial crisis that needs to be addressed immediately. Consumer debt, such as credit card debt, can be especially damaging to your finances. It's important to prioritize paying off high-interest debt and to avoid taking on new debt whenever possible.

If you want to buy happiness, spend your cash on experiences rather than stuff. Experiences, such as travel, can provide lasting memories and happiness. In contrast, material possessions tend to lose their appeal over time.

Buying property isn't the failsafe investment it's made out to be. Property ownership can be a great way to build wealth, but it's not a guarantee of financial success. It's important to do your research and to consider factors such as location, market trends, and maintenance costs.

Use the "Rule of 150" to decide whether to buy a house or use your money for something else. The "Rule of 150" states that you should multiply the cost of the house by 150. If that amount is greater than your annual income, it may be better to rent or invest your money elsewhere.

Index investing is less risky than betting on individual companies. Index investing involves buying a diversified portfolio of stocks or other investments. This approach is less risky than betting on individual companies or industries and can provide a more stable return over time.

Early retirement doesn't depend on how much you make; it's all about how much you save. Achieving financial independence and early retirement requires a commitment to saving and living below your means. It's important to create a budget, track your expenses, and prioritize saving.

Reducing the size of your target portfolio makes early retirement more manageable. Early retirement can be more achievable if you reduce the size of your target portfolio. This approach involves finding ways to reduce your expenses and live a simpler, more frugal lifestyle.

Achieving financial independence requires a combination of smart decisions, hard work, and a commitment to living below your means. By avoiding consumer debt, prioritizing savings, and investing wisely, you can achieve financial independence and live a fulfilling life. Remember to approach financial decisions with a clear head, prioritize experiences over stuff, and use tools such as the "Rule of 150" and index investing to your advantage. With these strategies, you can achieve financial independence and live a life of freedom and fulfillment.

Action plan: Make invisible waste visible.

Consumerism promises happiness but it’s usually little more than a temporary fix. What it does generate is waste. A lot of waste. Take clothing. According to the Guardian, Americans throw away 11 million tons of clothes every year. So here’s how to eliminate waste in your own wardrobe: make it visible. Simply push all the clothes in your closet to the left, and place an empty hanger with a piece of masking tape in the middle. Everything you wear from now on goes on the right of the marked hanger after it’s been washed. Over time, this reveals how often you use different items. On the right, are the superstars of your wardrobe; in the middle, pieces you do wear but infrequently; and on the left, clothes you never take out at all – the waste.