Financial Independence: A Quick and Dirty Path to Freedom

So what is “financial independence”?  Everyone bandies the term about, everyone says they want it, and yet most people can’t define it.  (In fact, it’s often lumped in with those aerie-faerie terms like financial freedom, abundance, and prosperity.)

The most common definition of financial independence is “an economic state of equilibrium where your income from passive sources meets or exceeds your expenses.”  In other words, you can wake up in the morning, not do any income-generating work, and know that your money is making enough money to cover your expenses.

Now that’s freedom.

Yet it’s totally arbitrary in terms of what it looks like for you.  Because you define your lifestyle and related expenses … unless you’re still letting the Joneses do that for you.

What does it take to reach your targeted definition of financial independence?  There are three general rules that should get you there:

  • Bring in more money than you spend, and invest the difference wisely.
  • Keep a tight rein on expenditures and reduce them where you can.
  • Keep at it; as they say, “Wash.  Rinse.  And repeat.”

After my financial tsunami at age 53, I looked at money with a new set of eyes.  Among other things, I decided I had to get familiar (even comfortable) with the idea that some day I would no longer be able to work.  It wasn’t a depressed time.  After all, I was actively picking up the pieces and had great faith in my ability to get back on my feet and thrive.  But I also had a new twinge of realism.

So I developed three scenarios for the future:  my ideal lifestyle, an average lifestyle, and a bare-bones lifestyle.  And I built detailed budgets for each.

The ideal lifestyle was actually the hardest to develop, because it was now so far from how I was living.  But after some fantasizing, I defined what really mattered to me, what part of that I would take into an ideal situation, and how much that would cost.

The average lifestyle was pretty easy because it was straightforward: it reflected what so many people were living.

And the easiest of all was the bare-bones scenario, because that’s what I was living after having lost everything.  I had scaled back to a very Spartan lifestyle.  And, surprisingly, I found it enlightening.  Cleansing.  And absolutely exhilarating when I realized that I would almost be able to live on Social Security if I retired at 65, and definitely could if I held out until I was 70!

Oh, the weight that came off my shoulders, knowing I’d never be a Bag Lady!  Knowing that I’d always be okay … The feeling of peace of mind that comes with that knowledge is so amazingly liberating that I have difficulty describing it.  But it is precisely what fuels my desire to work with women:  to get them making healthy money choices and on the path to long-term financial soundness.

I’ve since been chastised for “promoting” a reduced lifestyle … as if it were in some way unpatriotic.  (And as if I had some obligation to tell people to spend beyond their means, accumulate things they don’t need, and fuel the nation’s economic recovery.)

But that’s not my purpose or my message.

By identifying those three budgets, I now have viable targets for the future.  Most reassuring is that I know I already have one of them under control: the bare-bones one.

I know by stretching, earning more, saving more, being a little more creative, I can afford to give myself a long-term future that looks like the average lifestyle.

And by pulling out all stops, knocking it out of the park, and following my dreams, I know what it will take to give myself the best of everything.

But that’s “the best of everything” as defined by me.  It’s what reflects my values, my standards of integrity … all the things that float my boat.  Not someone else’s.

For those of us over 55, whose Social Security we’re told will not be touched, it means we know how much we have to be generating each month in passive income above our projected Social Security payment.  And that’s not a complicated calculation.

Granted, it may be an unsophisticated (even primitive) way of doing long-term financial planning, but it’s something anyone can do.  With just paper and pencil … with basic arithmetic.

And it’s the cheapest peace of mind you could buy yourself.


Sharon O’Day lost everything at age 53:  her home, her business, everything.  But how could that be?  She’s an expert in global finance and marketing with an MBA from the Wharton School.  She has worked with governments, corporations, and individuals … yes, she was the secret ‘weapon,’ if you will, behind many individuals in high places.  But still, she did!  Since then, Sharon has interviewed countless women and done extensive research to understand how that could have happened, especially with her strong knowledge of numbers and finance.

The surprising answers will be shared in her upcoming book “Money After Menopause.”  Today her mission is to show as many women as possible how to reach financial security for the long term.  She has developed a step-by-step plan to get past all the obstacles that keep women broke and scared … and from reaching the financial peace of mind they so deserve.

  • Sharon, You have now given me hope. I know I’ll be OK with a bare-bones lifestyle. I grew up poor and know I can live on beans and white bread if I have to without being a bag-lady. Am going to work out a budget for that and then one for an average and an ideal lifestyle, as defined by me. Having a b&w budget will surely help me see things more clearly so I can allocate my resources wisely. Am already 70 and working 2.5 part-time jobs and very thankful I have the good health that enables me to continue that while I get my finances in order. Thank you for your words of wisdom and encouragement.
    The Duchess

    • Sure works for me. Once we know we’ll be okay, everything else is gravy. GOOD gravy, mind you … And sometimes even nobility needs a Plan B! 😉

  • Patricia

    Great article Sharon. At first I thought I was reading a treatise that it’s OK to stay poor, a notch above bag lady. But I realize now that what you’re saying is, become comfortable and aware of where you are in the present, then, can you advance or get to where you may wish to get financially and emotionally! great job, Patricia Ogilvie

    • Thanks for reading on and not giving up at your first thought, Patricia! Me? Promote staying poor? Never! But I think we need to strive for our OWN version of “rich.” And, with all the economic turmoil these days, I think it’s critical to get a good realistic toehold and then push off hard from there …

      • So what you’re saying Sharon is if people shifted thinking about how unfortunate they may think they are, given a good look-see, they may find they already have riches in many more ways than just money? And that means an income that sustains them even if it’s not as much (or as little) as the neighbour next door! Hopefully people at the least, get work that brings in their version of rich. At least that’s what I’m hearing about the economic turmoil issue – no jobs. thanks again Sharon and great stuff! @pmogilvie:twitter Patricia

        • That part is true, @pmogilvie: that we should be measuring “rich” by our own standards, and not by those dictated by Madison Avenue and HGTV. I’m not aiming for complacency, but hoping instead to relieve the panic that can sometimes paralyze people or lead them to decide it’s not worth the fight to move ahead, to save as they can, and aim to move up from bare-bones to “whatever.” But I concede that the economy is not coming back as fast as it could, and is coming back looking very different from what it was before.

          • Interesting…. I work with energy which blocks and twists business and mon^ey. And I agree, the economic recovery process is stalled… a bit of confusion lines the pockets and hearts of the average. I think that’s where you come in! Keep on, Sharon. You’re doing a great job! @pmogilvie:twitter

  • Sharon, we lived on an inheritance until 7 years ago. We always thought we had it all together of course, but the fact was that we both were so clueless. That fact alone was so difficult for us to face and even talk about. So, 7 years ago we came to a stop in our life. It shook our foundation and our marriage. It was a scary season, we had a lot of pruning to do. People are in different seasons of their life for different reasons. Thanks for your post Sharon!

    • The most important thing, Olga, is that you faced it and survived it. We’ve all had our life lessons. As you say, we’re in different seasons, but there’s always a way to get through the lessons to the next season!

  • Denny

    I truly hope that anyone reading this article who is a parent will realize how important it is to include the topic of money as a part of what they talk to their children about…I love your “straight talk”!

  • Nancy

    I appreciate your definition of financial independence and your straightforward approach. You’ve inspired me to get out my pencil and paper! Thanks!

  • Beau Henderson

    I love this common-sense approach and practical wisdom. Thank you.

    • Thanks, @44ba8f545c0c7e2f23a0ebd304674f9d:disqus. Detailed, comprehensive retirement planning is a good thing. Yet, just getting the thought process going with tools that overcome the traditional resistance we use (“it’s too complicated,” “I don’t have the time,” etc.) can move mountains! 😉

  • @SharonODay:disqus This is what makes you such an inspiration to me and others. Your non-sugarcoated approach to money, how we use it and abuse it offers hope to all. Thank you for being so open, transparent and willing to guide others to their financial independence .

    • Instead of bringing people along “kicking and screaming,” @carlajgardiner:disqus, hopefully by simplifying things, people will be willing to take a step or two. Then, if they realize how good it feels to be getting some control over their finances, they’ll want to take a few more…

  • Wow, that must have been totally devastating to lose everything at 53. We are on a similar journey as you, not having lost, but always looking at ways to live on less for a better future. I appreciate that message instead of the one we hear in the media to ‘buy now, pay later.” Ya, you pay later all right! Hugs

  • Sharon, this is brilliant… I love the idea of creating 3 plans. I don’t know about counting on Social Security, though… so I think I’ll have to create a plan without that resource. How far out is your book now? I’m looking forward to it’s release!

  • i’ve lost everything twice due to leagl issues i call it my ten year boom bust cycle.


  • I’m on a mission to get to this point – “an economic state of equilibrium where your income from passive sources meets or exceeds your expenses.” Thanks for pointing me in the right direction Sharon!;-)

  • The whole idea of planning that far in the future is something I know I need to do, but something which I definitely have not done.  Weirdly, I thought about it more in my 20s and early 30s, when I set up my retirement accounts. But lately, it just hasn’t been on the radar.  Thank you for reintroducing the topic and helping my brain redirect!  ;o) 

  • Joseann Freyer-Lindner

    That’s a really reassuring post. So simple. And I also know that I have the “bare-bones one” under control after years of practice :-).

  • Yetunde Daramola

    Thank you for sharing this – what I will call “a word in season”. So much needed right now,

    I am currently working on and looking forward to a time when I will be able to say these apply:

    Bring in more money than you spend, and invest the difference wisely.

    Keep a tight rein on expenditures and reduce them where you can.

    Keep at it; as they say, “Wash. Rinse. And repeat.”
    We learn everyday.
    As someone slowly approaching menopause, I am looking forward to your book.

  • Great information, Sharon! My husband and I are in our mid-late fifties with one daughter at UCLA and another two years away from being on her own. We are considering downsizing and heading into the sunset with money in our pockets – more the average lifestyle. I am looking forward to it, actually. I love the way you define the three different types of lifestyles and I think it’s really important, especially for women who usually outlive men to be realistic and think ahead to the Golden Years, even though sometimes it is scary and even painful.

    • Laurie, since I originally wrote this in 2011, I’ve worked with countless women, getting them comfortable with their numbers, realistic about their present lifestyle expenses and headed towards a lifestyle that excites them long-term … and that is sustainable. That’s the key! Granted, it’s required getting creative at times, including moving abroad, for example. But who says our later years can’t be creative? 😉 All the best with your plans!

  • Sharon, thank you for sharing your wisdom with us. This is great to read from someone living in the US. There at least you have the option of a secured pension after a certain age. I hope that doesn’t change, ever! It is more than people living in other countries have. You are fortunate to realise how blessed you are with what you have. To me, that’s the beginning of happiness.