by Liz McGuire

Created on: June 25, 2007

Ask ten people what financial independence means and you will get ten different answers. The responses are as different as the financial situations and desires of the people you ask. But ask ten people who consider themselves financially independent how they got there and their answers will include a combination of most of the following 10 guidelines.

1. Buy only what you need. Everyone needs to splurge every once in a while. But financially independent people live within their means. Concentrate on the big items. Do you need a new car every three years? Of course not. If your aging car's repair costs begin to increase dramatically, then yes, you need a new car. But do you really need a brand new Lexus? Before you buy any big ticket item, ask yourself if you really need it, or just want it. Will an expensive late model car in the parking lot impress your boss enough to give you a raise? If you truly believe that, then find a used one. The thousands you save can be used to pay down your credit card debt or bump up your contributions to savings.

2. Spend only what you have. Debt is a good thing sometimes. A mortgage, for instance, is one of the best ways to increase your net worth. And when your home equity builds up, you can tap it for additional causes. A car loan may be a necessity. But you can't be financially independent if you run up credit card debt. Financially independent people only go into debt if they know they will make money off of the debt in the long run.

In America, we live in a society that expects instant gratification. You do not need a plasma TV to watch television. You do not need a McMansion as shelter. And you certainly do not need to update your entire wardrobe every year, if you purchased quality to begin with. If you can't afford it, don't buy it.

3. Get organized. Lost the rebate slip again? Do you have the inch finishing nails you need somewhere in the garage, but buy a new box anyway since you don't know where they are? Missed paying a bill because you left it in the wrong stack of papers? We throw a lot of money away by missing deadlines, buying duplicate items and paying finance charges and penalties. And we waste valuable time searching for things we need time that can be better spent improving our financial condition.

4. Save regularly. To be financially independent, you need to build wealth. Put the money aside ahead of time for the inevitable, unplanned events in your life, such as leaky roofs, unexpected car repairs and layoffs.

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