The right order is critical in achieving financial independence

Often success in a task comes not only from doing something, but doing it in the right order. Doing things in the proper sequence is critical to financial independence. And the latter represents the best thing money can buy—freedom from money worries. That’s something that tens of millions of people in the United States and the other welfare states of the West never achieve.


They run up big debts in their 20s and 30s, then spend the rest of their lives trying to pay them off. These people can make themselves miserable. However, credit card companies love them.

Accumulate Assets Early

So remember this: Financial independence means production—savings and investment— comes first. Consumption, the ability to buy lots of things, comes later. That doesn’t mean that one never consumes anything in the early years. But it does mean that, early in a person’s life, he or she emphasizes production and delays much consumption. He or she takes things in the right order.

Yet often in our society young people often do things in the wrong order: They start consuming big ticket items by using credit—-such as cars and other elements of a lavish lifestyle not justified by their income or assets—and figure they’ll start saving and paying for these things later.

This manana approach to saving and investing is wrong.

And often these habits are continued into middle and late age, even as a person’s prime earning years are ending. Finally, often when a person is close to retirement, he or she realizes that the opportunity to achieve financial independence has been lost; that he or she will be working for the rest of his or her life because of the spending mistakes of their 20s, 30s and 40s.

Caught on a Dead-end Road

This is the road to financial ruin that many people are stuck on. It is the road to misery and possibly even the breakup of marriages and families. Ultimately, the problems began because a person or persons put things in the wrong order: He or she didn’t accumulate before he or she started significantly consuming.

What a shame. If only, this average person had reversed the process; if only he or she had deferred big-ticket consumption for a while and saved and invested now instead of later.

Here is an example. As I write this, the average American household that revolves credit card debt—a revolver is a person who carries card balances from month to month and pays interest on the debt—has about $16,000 of card debt. That is a level that is starting to near the disastrous levels of early 2008 (That leads me to believe that some Americans, like the Bourbons kings, “learned nothing and forgot nothing.”)

A Lot of Red Ink

Much of the debt was incurred by people who “had to have” certain possessions right away; they couldn’t wait a while. The average card interest rate is about 15 percent. That means this person is paying some $2,400 a year just in interest on card debt. It could take this person decades to pay off this debt. This is bliss for the card companies. This is madness for the cardholder.

Stop the Madness!

Why not defer certain possessions, then take some of your money and start a regular program of investing? Using good no-load funds or ETFs, or even stocks and bonds if you feel you have the talent to pick a good mix of investments. You can start down the road to financial independence.

This is a road that can lead some people to economic freedom at a relatively young age. That means it could provide the best “thing” that money can buy—not big ticket status, “look at me I’m rich,” luxury items, but something more important: The freedom to pursue your life in the way you like.

For example, say you love the arts more than working in an office. With a big enough stash in investments and retirement funds you can pursue that career in the arts even though you don’t make a lot of money at the beginning of your arts career or possibly never. Money is no longer an issue. You’re doing what you love.

You achieved financial freedom, in part, because you avoided card debt. You were a transactor and paid off your cards every month, thereby avoided paying interest. The money other consumption crazed people spent on credit card interest, you were able to use to put toward your investments each month. And you followed an investment discipline every month—-especially in bad times when depressed prices meant your funds were selling at a discount and you were able to buy more shares—and achieved financial independence.

By your 40s or 50s, you were at a place you wanted to be: You were in control of your life. You could spend the rest of your life doing the things you wanted to do; not doing the things you have to do because you have $16,000 or more of card debt, with the card issuers sucking 15 percent on top of the principal debt.

Why make credit card issuers happy as their profit margins rise?

Why not, with a little spending and saving discipline now, make yourself happy in the future?

Save and invest now. Consume a lot more later. Now you have things in the right order.


Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post.