Both nationally and individually, now is the time for self-sufficiency

Independence Day is next week, and according to all indications, it will be a much lower-key celebration than we have had in previous years due to the October 7 massacre and the ensuing war with Hamas, Hezbollah, and Iran. There is a certain irony that Independence Day is falling out just as US President Joe Biden looks to cut off Israel from agreed-upon weapons transfers and the rest of the world imposes their own embargo, leaving Israel to fend for itself.

If you look in a dictionary for synonyms of independence, you will find words such as self-reliance and self-sufficiency. This is a wakeup call for Israel to stop being reliant on the rest of the world.

I have quoted this verse in Proverbs 22:7 many times: “The rich rule over the poor, and the borrower is slave to the lender.” I know it’s a rather simplistic outlook, and realpolitik is far more complicated. But sometimes things need to be broken down to their simplest form, and in this case, if you want to be able to wage war on your terms, you can’t be beholden to anyone.

Don't wait around, make things happen

Self-sufficiency or independence applies as much to personal finance as it does to geopolitics. What is financial independence? If you Google the term, you are going to find lots of articles on early retirement and imagining a life with no alarm clock and no work obligations. Others might think it is jet-setting around the world in your private jet.

I am going to stick to the definition used by Wikipedia: “Financial independence is having sufficient personal wealth to live indefinitely without having to work actively for basic necessities. In the case of many individuals whose financial circumstances fit this description, their assets generate income that is greater than their expenses. Under such circumstances, a person is financially independent.”

As I’ve written before, while many individuals believe you need to be rich in order to be financially independent – meaning a job with a salary of $250,000 and savings of millions of dollars –in reality, you just need to be able to cover your expenses with passive income to fit the definition. It’s not all about your assets; your expenses play a huge part in the equation as well. If you scale down your lifestyle, you can achieve independence on much more modest sums of money than you ever dreamed was possible.

I once heard a guest on the Dave Ramsey Show say: “Say no today so you can say yes forever!” I just love that quote. Because if you have some self-discipline now and think about the future, you can have a secure financial future. It really is doable.

There are many tips that can help one get on the correct money path. I’d like to share three with you:

What’s your goal?

I am a firm believer that people need to set goals to achieve sought-after milestones. If you want to improve as a runner or want to lose weight, goals help for both motivation and to keep pushing you forward to more progress. If you can’t answer, “Why am I doing this?” you will set yourself up for failure.

It’s important to set a realistic date for when you’d like to be financially independent. It’s just as important to know why you want to be financially independent. As a guide for how much money you will need in the future, I like to tell clients that they need about 20 years’ worth of this year’s expenses to make it.

Money doesn’t grow on trees.

Sitting around and dreaming won’t make it happen. You need to invest. Make saving and investing a priority. By saving and investing now, you allow your money to make more money. Start “paying yourself first” every month. Whether you invest in real estate, where you get a monthly rent check, or you invest in dividend-paying stocks, focus on a slow and steady approach to building wealth. While it may not fit with today’s smartphone swipe generation, where if you don’t like something, you just swipe it away, when it comes to building assets, slow and steady rules the day.

Don’t wait.

Just start. It doesn’t matter how much money you have. Waiting around until you manage to save a large amount of money and then start to invest will really negatively impact you in the future. Oh, and it probably will mean that you will never start to invest because you will never have “enough” that you will be comfortable to start with. By delaying investing, you are doing yourself a big disservice.

With some discipline on the spending side and a strategy and measured investing approach, you can be on your way to financial independence.

Happy birthday Israel!

Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.