A quote that is entirely relevant to financial independence:

His goal attracts him, because he doesn’t let anything enter his soul which might oppose the goal. This is what Siddhartha has learned among the Samanas. This is what fools call magic and of which they think it would be effected by means of the daemons. Nothing is effected by daemons, there are no daemons. Everyone can perform magic, everyone can reach his goals, if he is able to think, if he is able to wait, if he is able to fast.” — Siddhartha, Hermann Hesse

You can read the entire thing here.

The short list of required ingredients for reaching your financial goals:

  • Being able to think.
  • Being able to wait.
  • Being able to fast.
  • Not doing anything that opposes the goal.

Let’s deal with them in turn.

Being able to think means knowing and understanding personal finances. Reading the small print. If those people who got the biggest possible adjustable rate mortgages had stopped to think, they would have realized that adjustable rate means that the rate adjusts(!) If those who live paycheck to paycheck and spend everything they earn would stop to think, they would realize that an unforeseen expense or accident could send the whole house of cards tumbling down. If those who do trend following daytrading on options would stop to think they would realize that it is a zero (actually negative) sum game with many losers for each winner.

Being able to wait means having the patience to stick with the plan. People don’t get wealthy over night. It takes years of sustained effort. Even as little as $100 saved every month adds up even though initially it seems like trickles. Those who can’t wait and raid their savings from time to time will fail. It also means sticking with the chosen investments rather than switching them around every time the market turns negative.

Being able to fast does not mean starving. It means saying no to instant gratification. It means saying no to easy credit that has to be paid back some day with high interest. It means separating present wants from future needs. It also means controlling desires and being more immune to advertising. It means waiting an hour to get tap water for free rather than buying a $2 water bottle.

Not opposing the goal means that counterproductive actions should be curbed. It makes little sense to save on pennies if dollars are used on splurges. It means having a spouse with the same values. Frugal efforts are quickly ruined by a spendthrift spouse. Not opposing the goal is making every effort count towards saving more money rather than spending more money.

Originally posted 2007-12-22 15:53:00.