The financial independence mindset

There are many people who make lot of money and can be potentially financially independent in future, but they don’t. Conversely, there are many people who may not be making much money but can potentially be closer to financial independence in few years. They may or may not get there. But they can at least be on that path. What differentiates the both? Arguably it is the starting point – the mindset – the financial independence mindset.

Seems like a no brainier?

However, most of us don’t even realize that it is even possible to be financially independent. Subsequent steps on the road to financially independence come next.

The financial independence mindset

What is this financial independence mindset?

For a layman, financial independence (FI) mindset is the realization that you can be financially independent. With this realization you align your financial habits towards that goal. This is manifested in your financial habits – day in and day out.

Most of us wade through the life without realizing that this is possible. Nothing right or wrong about it. But the feeling of the possibility of financial independence can be quite empowering.

Here 3 pillars that form the financial Independence mindset

1 – The saving mindset

A person wanting to achieve financial independence need to be saving. Savings form the raw material for subsequent steps that may lead to financial independence. But you need to save. You need to spend less than you earn. You need to do this consciously. It needs to be a part of your habit.

Here are some examples that may differentiate between a financial Independence mindset and others vis a vis others:

  • Want to buy a car? A small car will be cheaper than a bigger car. A used car may be cheaper than new car. And car loan … What’s that?
  • Want to shop during a sale? A FI mindset person may think from utility/ need objective. Others may think from being “with latest trend” point of view or simply “I felt like buying this”
  • Cashback and deals on shopping (e.g. Cashkaro) – It’s awesome versus “who cares”!
  • Wasting stuff is something that is avoidable – Be it buying stuff that is not needed (And is eventually thrown away or let them just pile up!) or wasting food!

With a FI mindset you are more likely to be aware of impulse buying and its implications on your long term finances.

And I am not arguing in favor of skipping your coffees everyday to save money. It is more about prioritizing what expenses you are OK with and don’t mind as you enjoy that and what are avoidable. It is more about recognizing that frequent impulse buying can impact your long term finances. And about understanding that saving money is important (different from penny pinching). It is possible to enjoy the present, delay gratification and save for future. All can coexist.

2 – The investing mindset

What do with the saved money?

Invest. Simple?

If you are looking to be financially independent you need to have a source of passive income. Something that can cover your cost of living even when you are sleeping.

Investing well is essential for that. Some of the common options which probably should be a part of your investment mix are debt and equities. Debt instruments like fixed deposits (including PF, PPF etc.) , liquid fund, debt mutual funds are likely to protect your capital. Equities and equity based mutual funds can help grow capital over long run (but be aware of the risk). Real estate may also be a part of that equation (recommended to consider it only once you have enough liquid assets). Capital protection and capital growth – both are important. 

The investing mindset can manifest itself in lot of other ways also.

One obvious but not so obvious way is investing in up-skilling/ re-skilling.

Another way is considering other seemingly passive. income streams – like a website or royalty income via book. But these are not really passive as they seem to be. Nor is it that easy to make money off it, as often pitched to.

The important thing to consider is that your asset should have the potential to generate enough cashflows. While monetary investment s form an important part of it, non monetary assets are also something one can do well not ignoring.

The FI mindset entails using your resources to best possible use – be it making money work or be it investing in assets (non-monetary) which can yield good dividends.

3 – The protection mindset

There should be inbuilt shock-absorbents in your FI plans to account for unforeseen emergencies. The protection mindset entails that you proactively keep on getting ready for unforeseen circumstances. 

While one may not be able to predict the future and nature of emergencies, having an emergency fund is essential. And so is having enough insurance – term life insurance and health insurance to begin with.

This protection mindset even manifests itself in investing mindset. With protection mindset you’ll not be chasing growth mindlessly. It may or may not happen. It is equally important to ensure that you protect a major chunk of what you already have. This might not matter too much for somewhere who has tens of millions in a riskier asset. But for most of us, it matters. In investing capital protection and capital growth – both are important.

Securing future may not always be possible. But anticipating and being prepared as far as possible is something one can realistically target. 


The journey towards financial independence starts with recognizing that it can be achieved. Subsequent steps of saving and investing come next. If things start falling in place, then partial financial independence and financial independence can be achieved over a period of time. 

There can be many ways once can strive for financial independence. But it all begins with the financial independence mindset.


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