Developing the Core Financial Habits Series
The First Step Toward Financial Freedom and Independence
When I was a Junior Officer in the military, one of our senior leaders told us, “If you do not know where you are going, any road will take you there.” He was not talking about maps. He was talking about purpose, priorities, and daily decisions that add up over time.
Money works the same way. If you do not know why you are on this journey or where you want to end up, then any purchase can feel reasonable, and any upgrade can feel earned. Years pass. Income rises. Stress remains. The missing piece is not intelligence or effort. It is direction.
The Simpli-FI.money Formula provides that direction:
Spend less than you earn. Invest the difference. Avoid debt. Give it time to grow.
This is not a trick or a shortcut. It is a system. It is how ordinary people build extraordinary financial outcomes by practicing simple habits over long periods of time. I know because I started with a negative net worth when I left college. It took me 27 years to reach Financial Freedom at age 50. There was no lottery. No windfall. Just habits, discipline, and time.
The habits are simple. Living them consistently is where the wealth is built.
Start With Your Why
Before you sharpen a pencil or open a spreadsheet, you must decide why you are on this path. Your why is the anchor that holds when motivation fades.
Ask yourself:
- What does Financial Freedom or Independence look like in my life?
- What do I want more of if money were not the driver of my choices?
- What do I want less of that money stress creates today?
- Who else does my freedom benefit? Spouse, children, aging parents, my community.
- What would I do with my time if I did not have to trade it for money?
Write your answers on paper. If you are married or partnered, write them separately, then compare notes until you agree on the top three reasons. Put those reasons somewhere visible. Your why should be specific, emotional, and connected to the life you want.
Examples:
- I want to be present for my kids after school without checking email every five minutes.
- I want to have enough saved that I can choose work based on meaning, not money.
- I want to care for my parents with dignity when they need me.
- I want peace at home. No more fights about money.
Purpose first. Percentages second.
Your Savings Rate Determines Your Timeline
Once your purpose is clear, the next question is timing. How long will this take?
The answer comes from a single number: your savings rate.
Savings Rate = Total Annual Long-Term Investments divided by Gross Annual Income.
Long-term investments are the contributions you make to your long-term investment accounts. Examples include 401(k) or TSP contributions, IRA deposits, and transfers into a long-term taxable brokerage account that you plan to hold until Financial Freedom or retirement.
Why this number matters:
- It measures the gap between what you earn and what you keep.
- It determines how quickly your Freedom Fund grows.
- It also reduces the size of the target, because spending less lowers the annual lifestyle you must support.
A simple worked example:
- If you earn $100,000 and invest $20,000, your savings rate is 20 percent.
- That implies living expenses around $80,000.
- Your Financial Freedom goal is roughly 25 times expenses, which is about $2,000,000.
- Increase your savings rate to 30 percent and your expenses drop to $70,000. Your Freedom target falls to about $1,750,000, and you reach it sooner because you are also investing more each year.
This is the dual engine of freedom. Saving more both speeds you up and shortens the distance to the goal.
Below is a table that looks at how long it will take an individual to reach Financial Freedom given that individual’s Savings Rate. Financial Freedom is defined as the sum of your long-term investment accounts are greater than or equal to 25x your annual living expenses. Assumptions for the table below:
- Annual gross income of 100,000 dollars
- Long-term investments grow at 5 percent per year on average
- Financial Freedom is reached when your investments equal 25 times annual living expenses, which corresponds to a 4 percent safe withdrawal rate
How Savings Rate Impacts Time to Financial Freedom
| Savings Rate | Years to Financial Freedom | Annual Living Expenses | 25× Living Expenses (Goal) | Account Value at Financial Freedom |
|---|---|---|---|---|
| 5% | 66 | $95,000 | $2,375,000 | $2,403,189.56 |
| 10% | 52 | $90,000 | $2,250,000 | $2,328,561.65 |
| 15% | 43 | $85,000 | $2,125,000 | $2,144,900.08 |
| 20% | 37 | $80,000 | $2,000,000 | $2,032,562.78 |
| 25% | 32 | $75,000 | $1,875,000 | $1,882,470.73 |
| 30% | 28 | $70,000 | $1,750,000 | $1,752,077.48 |
| 35% | 25 | $65,000 | $1,625,000 | $1,670,448.46 |
| 40% | 22 | $60,000 | $1,500,000 | $1,540,208.58 |
| 45% | 20 | $55,000 | $1,375,000 | $1,487,967.93 |
| 50% | 17 | $50,000 | $1,250,000 | $1,292,018.32 |
| 55% | 15 | $45,000 | $1,125,000 | $1,186,821.00 |
| 60% | 13 | $40,000 | $1,000,000 | $1,062,778.97 |
| 65% | 11 | $35,000 | $875,000 | $923,441.17 |
| 70% | 9 | $30,000 | $750,000 | $771,859.50 |
| 75% | 8 | $25,000 | $625,000 | $716,183.17 |
| 80% | 6 | $20,000 | $500,000 | $544,153.03 |
| 85% | 5 | $15,000 | $375,000 | $469,678.66 |
| 90% | 3 | $10,000 | $250,000 | $283,725.00 |
| 95% | 2 | $5,000 | $125,000 | $194,750.00 |
How to use this table:
- Find your current savings rate.
- Note your implied annual expenses.
- See both your target Freedom Fund and a realistic timeline if you maintain that rate.
- Use the methods in the next section to raise your savings rate by 5 to 10 percentage points over the next 12 months.
Small increases add up. A five point increase now can shave years off your journey.
If you want to estimate how long it will take using your own numbers, you can use Coach Holdren's Simple Economic Model (SEM) Calculator.
The SEM Calculator answers the following question: If I start with “zero” dollars today, how long would it take me to build an investment portfolio that could either replace my current expenses (Financial Freedom) or my current income (Financial Independence)?
Core Habit #1: Spend Less Than You Earn
This is the first habit because everything else depends on it. To build wealth you must create margin, the space between income and expenses. Margin funds your investments. Margin creates flexibility. Margin reduces stress.
Spending less than you earn is not about deprivation. It is about intention and alignment. It is about living a life where your spending reflects your values and supports your priorities.
It means you choose:
- Peace over pressure.
- Freedom over status.
- Options over obligations.
When you live below your means, you are not living less. You are living deliberately. You are directing resources toward the future you want.
This is the beginning of financial agency. It is the shift from reacting to directing.
Three Methods to Live Below Your Means
There is no single correct way to create margin. Choose the method that fits your personality and season of life. You can always switch or blend.
Method 1: The Minimalist Method
Track. Learn. Adjust.
Soccer analogy: reviewing game film to improve performance.
Principle: You cannot fix what you cannot see. Most people do not overspend because they are reckless. They overspend because they are unaware.
How to run the Minimalist Method for 90 days:
- Track everything. Use a notebook, a simple spreadsheet, or your bank’s export file. Capture every transaction, even small ones.
- Categorize weekly. Label each expense as a Need, a Want, or Waste. Needs are essential: housing, utilities, groceries, transportation, insurance. Wants improve life but are optional: dining out, entertainment, hobbies. Waste is spending that adds little or no value now: unused subscriptions, impulse buys, status purchases.
- Calculate your financial floor. At the end of each month, total Needs. Ask yourself what small changes could reduce Needs without sacrificing quality of life. Examples include a smaller data plan, better insurance quotes, meal planning, carpooling, or negotiating rent.
- Decide one or two new standards. For example: “We dine out once per week,” or “Subscriptions must earn their keep or they are cancelled.” A standard is a pre-decided rule that removes future decision fatigue.
Quick wins many families find in 30 days:
- Audit subscriptions. Eliminate duplicates or low-value services.
- Capture leakage. Use cash envelopes or separate debit cards for dining out and fun money.
- Buy once, use fully. Finish what you have in the pantry, freezer, garage, and bathroom before buying more.
- Right-size fixed costs at renewal. Cell plans, insurance, internet, gym, and software are often negotiable.
Pitfalls to avoid:
- Turning Needs versus Wants into moral judgment. Wants are not bad. They must simply be intentional.
- Cutting so deep that you create friction at home. Sustainability beats aggression.
- Tracking without making decisions. Data is only useful when it changes behavior.
Who thrives with Minimalist:
- People who like clarity and analysis.
- Families who suspect silent waste.
- Anyone building a clean baseline before aggressive investing.
How to measure progress:
- Reduce Waste by at least 50 percent within 60 days.
- Lower fixed costs by 5 to 10 percent at the next renewal cycle.
- Document your new financial floor and compare it to your starting point.
Method 2: The Pay Yourself First Method
Automate wealth.
Soccer analogy: score early and control the game.
Principle: If saving is optional, spending will win. Treat saving as your most important bill.
How to run Pay Yourself First in four steps:
- Choose a target savings rate. Start with a level that is firm but achievable, for example 10 to 20 percent.
- Automate deposits on payday. Direct payroll into your 401(k) or TSP. Auto transfer to Roth IRA or brokerage on the same day each month. Do not wait to see what is left.
- Spend what remains. Build your lifestyle around the net amount that hits checking after savings.
- Step up your rate. Each raise, bonus, or debt payoff triggers an increase of 2 to 5 percentage points in your savings rate.
Simple scripts to support this method:
- “We can afford anything that fits after our savings transfer. We cannot afford what requires us to reduce savings.”
- “Raises go to Future Us first.”
Pitfalls to avoid:
- Setting the rate unrealistically high on day one and then needing credit cards to fill the gap. Start firm, ratchet upward.
- Forgetting to increase contributions when income rises. Automate increases where possible.
- Assuming automation equals optimization. Review annually to make sure account choices and balances still fit your plan.
Who thrives with Pay Yourself First:
- Busy professionals who do not want to track line items.
- Dual-income families who want clarity fast.
- Anyone who prefers consistency over micromanagement.
How to measure progress:
- Savings rate implemented within 1 to 2 pay cycles.
- No credit card balances carried month to month.
- Savings rate steps up at least once every 12 months.
Method 3: The Blended Method
Automate first. Analyze next. Improve continuously.
Soccer analogy: take the early lead, then study the film to get better.
Principle: Momentum plus mastery beats either alone.
How to run Blended in three phases:
Phase 1, weeks 1 to 2:
- Set an initial savings rate, for example 10 to 20 percent. Automate it on payday.
- Freeze lifestyle creep. No new fixed payments during this phase.
Phase 2, weeks 3 to 14:
- Track spending like the Minimalist Method. Categorize weekly.
- Identify easy wins and implement them within days, not months.
Phase 3, weeks 15 to 18:
- Increase your savings rate by the dollars you removed from Waste and low-value Wants.
- Document your new financial floor and the new savings rate.
- Celebrate the change with a small, intentional reward that fits the plan.
Pitfalls to avoid:
- Collecting data but never making a cut. Each week needs at least one action.
- Cutting everything fun. Keep a reasonable fun budget so you can sustain the plan.
- Never updating the rate. The win is not tracking. The win is increasing savings.
Who thrives with Blended:
- People who want to start strong and then refine.
- Couples who want a system that is simple but fair.
- Anyone who has tried budgeting before and wants a fresh approach.
How to measure progress:
- Savings rate rises by at least 5 percentage points within 90 days.
- Waste category cut by at least half.
- Couple or household alignment improves. Fewer money fights, clearer decisions.
Handling Common Real-World Situations
Irregular income. Use an average of the last 6 to 12 months of pay to set your base savings transfer. Create a small buffer fund equal to one month of variable expenses before raising your rate.
High-interest debt. If interest exceeds your expected investment return, prioritize eliminating that debt while keeping a modest savings rate in place so the habit stays alive. Core Habit 3 will go deeper on this.
Family friction. Agree on a shared fun budget and personal discretionary amounts. Put them on autopilot. This protects the relationship while the plan advances.
Inflation pressure. Focus on the big levers first. Housing, transportation, food, and insurance drive most budgets. A few right-sized choices here beat dozens of tiny sacrifices.
The Three Metrics That Matter
Track three numbers monthly:
- Savings rate. Total long-term investments divided by gross income.
- Financial floor. What it costs to run your life with quality but no waste.
- Freedom number. Twenty five times your annual living expenses.
Those three numbers tell you where you are and how fast you are moving.
Review Cadence That Works
Weekly: 10 minutes to confirm transfers, pay bills, and choose one small improvement.
Monthly: 30 minutes to review spending categories, progress, and next steps.
Quarterly: 60 minutes to reset standards, raise the savings rate, and re-evaluate fixed costs.
Annually: One evening to review all accounts, rebalance investments if needed, and re-commit to your why.
Consistency beats intensity. A small review done every time beats a perfect review done once.
Why This Habit Changes Everything
When you spend less than you earn, you create breathing room and buy back your peace. You stop living paycheck to paycheck. You begin sending dollars into your future rather than consuming them in the present. Your money starts working while you sleep. And eventually, you gain financial agency, which is the power to make choices based on your values, not your paycheck.
This habit unlocks the rest of the formula. Without it, nothing else holds.
Coach’s Challenge
Do these three things before moving to Core Habit 2:
- Write down your why and put it somewhere you will see daily.
- Calculate your savings rate. If you are not sure, start with a 15 to 20 percent target and automate it.
- Choose your method for the next 90 days: Minimalist, Pay Yourself First, or Blended. Put it on the calendar. Start this week.
Take Action now. Progress starts with intention. Freedom begins with margin.
Next Up: Core Habit #2 — Invest the Difference
Once you create margin, the next step is simple and powerful. Invest the difference.
In the next post, you will learn where to invest, how to automate contributions, and why compounding does most of the heavy lifting over time. You will see how to turn steady deposits into a Freedom Fund that works whether you are on the clock or off the grid.
Lace up. Training continues.