Fear of failure, or looking stupid, holds us back from learning new skills. Whether you are learning to swim, or figuring out the risks with borrowing a certain amount of money, it pays to develop your beginner’s mind.

If you had trouble following this series then get a copy of The Richest Man in Babylon. The book uses stories, rather than case studies, to teach about money. 

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When I ask people to define financial independence, most back into their answer based on current spending. Other people have no idea about their spending so they toss out a huge number that they think would enable them to stop working. Both of these methods fall short because the answers they imply are unrealistic.

I started this series by asking you to consider if a million dollars was as much as you thought. To balance that idea, I showed the power of saving $20 per day.

While it seems attractive to have our financial needs covered via passive income (see Four Hour Work Week), the idle rich are poor role models and the active rich are often held in bondage by their spending.

Constantly saving money to have the ability to spend whatever we want at some future date is a lousy goal. First, we might never achieve our goal. Second, it overlooks a much easier, and more valuable, target. Financial independence is about having the ability to choose your location and occupation.

Additionally, financial reserves give you the ability to say yes to what you want to do and, most importantly, make it easier to define what you are unwilling to do. Many wealthy people end up in prison, or dishonored, because they forget that financial wealth makes it easier to say NO to bad ideas. 

For example:

• Do I work in a team that shares my personal values?
• Should I keep my mouth shut when senior management break the law?
• Should I lie and cheat the bank, tax man, shareholders or government?
• Should I invest in companies that sell products that hurt my fellow citizens?
• Should I sell a product that I know is not in the customer’s best interest?

I’ve had to make decisions on all of the above. These choices cost me (a lot of) money in the short term. However, my choices helped maintain my freedom, and honor, over the long term.

When I think back, a few of my ethical decisions appear irrational based on the economics that I learned in school. Perhaps we undervalue self-respect, or fail to capture the rapidly diminishing returns beyond our basic needs. Perhaps there is a value, of freedom, that we’re not capturing in traditional economic analysis.

A reserve fund, and a mantra of being willing to make less, changed my ability to stand for what I believe in. Optimizing for self-respect is easier with the reserves to sustain unemployment! I’ve chosen unemployment more than once. 

If you haven’t created financial freedom for yourself then set a small daily goal and get started. Make time for the financial education of your kids and spouse. In teaching others, you will remind yourself of the basics:

• Spend less than you earn
• Protect core capital
• Be wary of leverage
• You only need to achieve financial security once
• Wealth is about freedom, not money

These topics are poorly understood and largely ignored.

Start small and stick with it.