The Biggest Obstacles to Financial Independence – And How to Get Past Them

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Obstacles to Financial Independence
Financial independence is an almost universal goal. It’s on just about everyone’s bucket list, with the only major barrier being “when”. Yet relatively few ever reach that point in their lives. The problem is that reaching financial independence is something like successfully overcoming a series of hurdles. So what are the biggest obstacles to financial…

Financial independence is an almost universal goal. It’s on just about everyone’s bucket list, with the only major barrier being “when”. Yet relatively few ever reach that point in their lives. The problem is that reaching financial independence is something like successfully overcoming a series of hurdles. So what are the biggest obstacles to financial independence, and what can you do to conquer them?

Obstacles to Financial Independence

The Inability to Define Financial Independence

This is often the most basic of the obstacles to financial independence. You can hardly achieve anything if you can’t define specifically what is.

One of the biggest issues is the misperception that financial independence is about becoming wealthy. But that’s a mountain that a lot of people don’t care to climb. Life is a trade off between time and money, and a lot of people rightfully don’t want to give up too much of their life’s time to the pursuit of money. Fair enough.

But in truth, achieving financial independence is more about creating an improved financial condition than it is about getting rich.

No two people are likely to come up with a definition of financial independence that will work for them both. But let’s try and take a stab at listing some likely financial independence attributes:

  • Earning more money each month than you need to live on
  • Being debt-free
  • Not being worried about losing your job
  • Having enough saved to cover contingency expenses
  • Being on track to a comfortable retirement
  • Being able to comfortably support your family
  • Not being fearful about the state of the economy
  • Having the money to do the things that you want and to have what you want, within reason

These are just some of the very real benefits of financial independence. And notice that none of them require being wealthy.

Lack of Orientation Toward Savings

We live in a consumer driven culture. If you doubt this, just watch TV for about an hour or so. You will be bombarded with a series of commercials – many of them more than a little bit convincing – that are designed to get you to spend money on products or services that you otherwise wouldn’t buy.

The problem with consumption is that it has no end. It’s not as if you buy one more product or service, and you’re done forever. We all seem to have an innate desire to have at least a little bit more than we already do. The culture pushes us off the cliff, by “helping” us to know what it is that we (should) need or want.

The end result of this bombardment is a lack of orientation toward savings. Not only is the attention focused squarely on consumption, but there is often little thought of saving money at all. This is proven by the fact that a recent survey has found that 62% of Americans have less than $1,000 in savings.

If you hope have any chance of ever achieving financial independence, you absolutely have to get the savings component working in your favor. That will require that you tune out the culture, cut way back on consumption, live below your means, and save and invest the difference. Here are some tips to get started investing.

Limited Ability to Increase Your Income

Though it’s possible to achieve financial independence by living beneath your means – no matter how limited those means are – it will come about more easily if you can expand your income.

Admittedly, there are certain career fields where that’s difficult to do. But in many more cases the problem is a lack of motivation. You get comfortable in your current job, and though you want to earn more, you’re reluctant to make the sacrifices that will be needed to make it happen.

Unfortunately, increasing your income has become completely necessary. The rising cost of living is an obvious reason. If you want to stay ahead of that curve, you have to increase your income. If you want to increase the amount of money that you have to save and invest, you will have to increase your income at a rate that’s greater than the rate of inflation.

Find out what you need to do to move up to the next level in your career. Get the skills that you need, or necessary qualifications. And perhaps most of all, step up on the job and make yourself more valuable to your employer.

You don’t have to increase your income overnight, but you should have a strategy in place to keep it on the upswing as you move into the future. And as your income increases, bank it – don’t spend it!

Too Much Debt

Debt is closely tied to the obsession with consumption. If you’ve become sufficiently convinced that you need a certain product, service, or lifestyle, you may pursue it even if you don’t have the financial means to get it. Debt fills the gap.

Most people don’t look at the dark side of debt when they are on the hunt for consumption. Instead, they project themselves owning the otherwise unaffordable toy, while convincing themselves of how the “easy monthly payment” will fit neatly into their budget.

But debt is like a cancer. It grows and gradually sucks the life out of the host. Some debts survive long after the product or service that it was used to purchase.

If you hope to achieve financial independence, debt must be avoided at all costs. Debt represents a drain on your cash flow, making it more difficult to save and invest money. In fact, it’s not an exaggeration to say that the elimination of debt is one of the very foundations of financial security.

So how do you clear away the debt that you may have accumulated, and that’s preventing you from achieving financial independence?

  • Stop acquiring new debt; pay cash for what you buy, and if you can’t, then you don’t need it
  • Concentrate on paying off your smallest debt, and once it’s paid, move on to the next smallest; this is Dave Ramsey’s debt snowball method
  • Once your debts are paid, immediately began applying the amount that you were using to pay your debts to savings
  • Vow never to borrow again, except perhaps for a car loan or mortgage, and only very conservatively if you do

Getting out of debt may be at least as difficult as going on a crash diet. But if you constantly remind yourself that the ultimate payoff is financial independence, you may have all of the motivation that you need to see it through to the end.

A High Structural Cost of Living

This is a situation that is completely incompatible with financial independence. It can be defined by the fact that your basic living expenses – housing, transportation, debt, and even food consumption – take up a disproportionate amount of your income. Not only does this leave little money left over for savings and investments, but it’s also a very stressful way to live.

The problem with a high structural cost of living is that there are no relatively easy ways to deal with it. The lightweight favorites of clipping coupons, giving up lattes, or cutting cable TV won’t do it. The only way to deal with it is to cut the structural expenses themselves.

That can involve considerable amount sacrifice. For example, it may mean moving to a less expensive home or area, or selling a vehicle that has a large monthly payment attached to it.

It’s a heavy price to pay, but one that may be well worth paying if it puts financial independence in your grasp. And it’s an interesting relationship – once you have financial independence, you just don’t need all of those expensive toys anymore.

A Lack of Long-term Commitment

This obstacle to financial independence probably has more to do with personal discipline than any of the others. Some people are naturally committed to long-term goals. In fact, such people may feel that life may not be worth living if they don’t have them. But if you’re one of the people who don’t, then achieving financial independence will never happen.

Financial independence is rarely an overnight event (except of course on TV). It can take many years to achieve, particularly if you’re already are dealing with some of the obstacles above. In many cases, it can take can take 10, 15 or 20 years. Unless you have the discipline to commit to your plan for as long as it takes, you’ll never achieve financial independence.

You’ll have to commit to years of steadily increasing your income, keeping living expenses and other spending habits to a minimum, and saving and investing increasing amounts of your income each year.

There may be an element of drudgery in that process that makes you want to quit. But if you can stay focused on the end goal – the financial independence that your efforts will be buying – you can develop the commitment that it requires.

Have you been struggling to reach financial independence? Have you considered that any of these obstacles to financial independence?

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About Kevin Mercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.

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