Here in Florida, summer is the time to exercise indoors. From the middle of May through September, I take my routine morning walk on a treadmill looking out over the pond behind our house. I get to watch the cardinals and blue jays find the feeding block my wife Jo hung next to a tree outside the window. A menagerie of animals follow, picking up scraps below the bird block. Late in the afternoon, Jo will cut up a piece of bread and walk toward the pond. Almost on cue, 10-15 turtles will pop up and swim toward her.

As the sun goes down, these animals disappear to their hiding places, and the nocturnal creatures—raccoons, armadillos, and possums—go through a similar routine. Wake up, search for food, repeat, repeat, repeat.

Not too long ago that was the routine we all followed from childhood until death. After all, having enough independent wealth to opt out of that routine is no more natural to people than it is to the blue jays and raccoons I see most days.

When my grandmother remarried, she chose a farmer, and I spent several summers on a dairy farm. As a young lad I had chores, mostly cleaning up, tending a garden, and helping out. They were not optional. His mother lived with them, and she too had chores—even into her mid-90s. I spent many an hour helping her shuck lima beans and snap peas for canning so they'd have food for the long Midwestern winters.

As I got a bit older, my duties expanded to cleaning the barn after milking the cattle and to building giant haystacks with a pitchfork so the animals would have food over the winter, too. Every day was the same: eat, sleep, go to work… repeat, repeat, repeat!

Wealth Buys Independence

For those who want the option to retire (in the post-modern Western world, that includes pretty much everyone), they trade their time, knowledge, and skills for money with the hope that someday they will have saved enough so that their money itself produces a healthy income and thereby, they can slowly trade their money for time. It's no longer a must to repeat, repeat, repeat… Ideally, you have a couple of decades of true independence where you choose how to spend your time.

Financial independence gives you choices. You don't need to work a job you hate just to survive or to support your family. And for women in particular, it provides freedom from unhealthy relationships they would rather not be in.

You know all of this already. The million-dollar question is: How can you get there?

Pillar #1—Acquire Wealth

Put yourself in the position to be able to acquire wealth. It's no secret that some educational fields lead to higher wages than others. Focus on a field with high earning potential that suits your interests and talents. Then, become the best at your chosen trade or profession. For many folks, that means running their own business.

Whatever your job, be prepared to work smarter and probably longer hours than the guy next to you and to keep learning and honing your professional skills. Still, the ability to earn a good income is only the first step.

Pillar #2 – Accumulate Wealth

This is the part most people don't like: to accumulate wealth, you have to live below your means. Otherwise, there's nothing left to save and invest.

In The Millionaire Next Door, authors Thomas J. Stanley and William D. Dank cite many examples of high wage earners like doctors and lawyers who spend every penny they make. Others think they're rich because of their fancy cars and country club memberships. Sad to say, their wealth is an illusion.

Financial independence doesn't come from how much money you make—it comes from how much you accumulate. Until you save enough so that your money is doing all the work, you cannot be completely financially independent.

Stanly and Dank mention in their book that nearly 90% of top of the line Lexuses and Mercedes are financed. Each time I see a nice luxury automobile at a stoplight, I wonder if the guy driving the old Ford is the wealthiest one waiting for the light to change. From the minute you start making money, wealth accumulation should be high on your priority list.

Pillar #3 – Wealth Retention

The financial acumen necessary to retain wealth is the most overlooked pillar of financial independence. Sure, you know the others even if you don't practice them, but learning how to manage, invest, and make your money grow is just as essential. Otherwise, your wealth can't fund your lifestyle and sustain your financial independence.

Think of the all-too-common stories of a generation earning an exceptional amount of money, only to have the second or third generation of the family squander it. They had wealth, but not the skills to keep it.

In long-term marriages, it's not uncommon for the husband and wife to work as a team to achieve their financial dreams, but then the spouse who handled all the finances dies and the other is left vulnerable. Jo and I see it all the time. That's when the wolves move in, often disguised as stockbrokers, money managers, “gold diggers” of either sex, or uneducated children.

What level of financial expertise should each spouse have? That's a tough one. Not everyone is going to be an active options trader or interested in trading stocks, trying to time the market. And that's just fine. It shouldn't be the goal anyway. However, learning the basics, making trades, understanding things like portfolio diversification, position limits, stop losses, and different types of investment vehicles is not that difficult. It just takes a bit of time and a good mentor.

Many of our friends use managers. The good ones do more than invest your money. They educate you every step of the way. For every investment they make with your money, you should understand what they're doing and agree with the decision.

Don't ever invest in anything you don't understand or are uncomfortable with. A good money manager will explain investment decisions in terms you can understand. If he can't, perhaps looking for one who can is in order.

The Three-Legged Stool

Most people never achieve financial independence. Instead, they worry about money until the day they die. As far as I know, we only get one trip through the journey of life, and it's hard work no matter what. We might as well strive to be the oddball… part of the minority that figures it out.

Financial independence isn't about hitting a net worth of $500,000 or $50 million. There is no magic number. It's the process of accumulation, living below your means, and having enough financial acumen to make your money work so you don't have to work. Most people never get there.

You don't have to accumulate millions to be rich. A rich life is one where you have enough money to choose how you spend your time. If you live a middle class lifestyle during your working years, make sure you can fund it during retirement, too.

Financial independence is like a three-legged stool: accumulate, grow, retain. All three legs need to be sturdy for the stool to support you throughout life. And it's what allows you to choose whether to look outside at those who are working from the comfort of an air-conditioned home or to be outside sweating under the hot Florida sun. As you move through life, which side of the window do you want to be on?

On the Lighter Side

First, congratulations to our chief analyst, Andrey Dashkov for passing the Level II CFA exam with flying colors! That's no small feat. 

Daughter Holly, her husband Casey, and the two little guys, Brock (5) and Braidyn (10) are here for the week. Boy, it's hard to diet when the family arrives! Grandma Jo (so far) has baked two pies, cupcakes, and cookies—and breakfasts have featured chocolate-chip pancakes. What I fail to understand is I can put on five pounds in a week, but it takes a month to lose it. It is sure fun to sit down and enjoy a family meal together. I generally turn off the television and we actually get really old-fashioned and talk to each other.

Speaking of home life, the latest issue of BIG TECH includes a phenomenal look at the future of light bulbs. Here's how my colleagues at BIG TECH make money for their subscribers:

The best approach is a pick-and-shovel play, a term coined during the California gold rush, when it seemed the only ones making any money were the guys selling picks and shovels and other supplies to miners (including those new-fangled dungarees; in the end, Levi Strauss' enduring denim clothing was one of the most valuable things to come out of the gold rush).

Unlike the technology letter devoted to new start-ups and speculative issues, BIG TECHfocuses on the type of companies a conservative investor would be more inclined to add to the portfolio. Not only did I buy the stock recommended in the latest issue, Jo and I headed to Home Depot to check out some of these new LED lights. I read a lot, and these old eyes get tired at the end of the day. The new LED bulbs are much better for reading at night.

Jo and I had lunch with a group of retirees a couple days later, and I shared what I'd learned. The bulb came with a 10-year warranty. They estimate if you use it three hours a day, it will use $1.69 in yearly energy cost and last 22.8 years. Gosh! Then I'd be set until almost 97. We agreed that our goal is to outlive our new light bulbs….

I urge all of our readers to learn more about these light bulbs and all the exciting investments in BIG TECH's portfolio by signing up for a no-risk, 90-day trial subscription here.

We should all have a new goal: to outlive our new light bulbs!

And finally…

A couple of cute sayings about aging:

  • I was always taught to respect my elders, but it keeps getting harder to find one.
  • Aspire to inspire before you expire.

Until next week…