How lighthouses will save your life

If you haven’t read my post about setting your financial goals, read that post before trying to understand these “lighthouses” that will help you achieve your FI goals. Lighthouses are used to guide a ship at sea or warn a ship of upcoming danger. As we journey through the seas of personal finance, these lighthouses will serve as beacons to lead you to the calm shores of early retirement. Before diving into each one, I want you to make a paradigm shift about the way you think about money. I want you to start thinking about money as a tool.

Money is a tool

Think about a hammer, in and of itself a hammer can do nothing. oIpwxeeSPy1cnwYpqJ1w_Dufer Collateral testThe individual that picks up a hammer with building house in mind, will systematically build the walls, framing and roof using that hammer. The individual that picks up that hammer with destruction in mind could use that hammer to break into the window of a house and steal from someone. The paradigm shift I want you to grasp is that money is just a tool, it is not your salvation, cannot provide love or inherently provide happiness. Money is simply a tool, define how you will use it and use these lighthouses to outline the path you will follow to use money to achieve your financial goals.


Lighthouse 1: Reduce expenses

Reducing your expenses can cover a gamut of options, from clipping coupons to buying a foreclosure there are a myriad of ways to save. Whichever way you reduce expenses will count towards your bottom line (Every little makes a mickel! – Ben Franklin). Examining your life and doing something about your excessive spending (i.e. cutting costs) can be one of the most powerful exercises in your financial independence journey. After you do a monthly budget, analyze your needs versus your wants. Determine in your mind that your financial independence goals are worth more than that extra pair of shoes each month, or that cable bill that’s growing as fast as your kids.

Reducing expenses can also help you identify free opportunities that encourage spending time with your family and friends. These free activities can include things like going for a walk, riding bikes or playing cards. If you prefer to get out and about, you can find activities that are engaging in your community through volunteering, a local church or joining a meetup ( group that shares your interests! Whichever way you decide to reduce your expenses, as those dollars come back into your life, be sure and channel those dollars to Lighthouse 2 and tackle your debt like it’s trying to kill you….because it is!


Lighthouse 2: Eliminate debt

Debt is one of the oldest forms of slavery that this world has become accustom to. Debt-bondage in ancient Greece and Rome were voluntary forms of slavery. In our society today, however, debt-bondage has become the most widespread use of slavery that exists across the world. Debt-bondage should be avoided like leprosy because of the ill-effects that it causes its possessors.

Modern debt

The effects of modern debt, however, are actually two fold, not only does it enslave people in society today without even making us realize that we are slaves, it gives us a false sense of security and mistrust in ourselves. Let me give you an example, if I go to Wells Fargo to buy a new home using a debt-bondage (i.e. mortgage), not only am I becoming a slave to Wells Fargo by having to pay for the house and pay them back with interest, but now I have placed my security into the hands of the lenders.

This means that if I fail to pay the debt (mortgage), Wells Fargo can foreclose on my house and I would be putting the security and well-being of my family in jeopardy, which is a very large price to pay for slavery. Most people do not realize that if they buy a $200,000 house, on a 30 year loan, with an interest rate of 3.5%, they will end up paying over $300,000 for that house over the life of the loan. I’m not saying you can’t get a mortgage for a house, I just want you to realize the power that debt can have over our lives.

Proverbs 6 says it best, if you have gone into debt, do this: “Friend, don’t waste a minute, get yourself out of that mess. You’re in that man’s clutches! Go, put on a long face; act desperate. Don’t procrastinate—there’s no time to lose.”

Long story short: Don’t go into slavery, avoid debt.

As you pull yourself out of debt, you will begin to free up so much money in your life, channel those monies into Lighthouse 3 by kicking up your savings rate and start stacking those benjamins!


Lighthouse 3: Increase your savings rate 

Now that you have decreased your expenses and paid off your debt (and you’re avoiding debt) you’ll notice that you’ll begin having excess dollars every month, and the most important thing you can do is make sure that these dollars aren’t mindlessly spent, you want to start increasing your savings rate. What is a savings rate? Simply put, your savings rate is the amount of money you’re able to save as a ratio to your income. Let’s break it down, if you bring home $4,000 a month, and you spend $3,000 on expenses (i.e. house payment, groceries, electricity, gas, water, etc.) then you will be saving $1,000. Put simply:



So, in this example, your savings rate is 25%. As you continue reducing expenses and avoiding debt, you will see your savings rate begin to increase. What’s important to remember is that as your savings rate increases, the time until you are financially independent gets closer. Your savings rate will eventually determine the amount of money and the age you will be able to be financially independent. Check out my post about “Why your savings rate matters” to see the math behind how saving 50% of your income will allow you to be financially independent in 16 years! 16 years? not 60? That’s right, 16 years!

50% ?!?!

You may be thinking, “50% of my income? I can barely save 10% right now”. That’s OK, as you reduce your expenses and pay off your debt, you’ll be able to stash more cash in your nest egg and bring your retirement age down. If you are able to save / live on 50% of your income you can be retired in 16 years, it’s that simple. Imagine what it would be like to leave your job at 45 and be completely financially independent. Can you picture it? What does early retirement mean to you? If you really want to retire early, increasing your savings rate is crucial to do just that.

Sounds all well and good, but once I start increasing my savings rate, how do I invest my money to achieve such results? I’m glad you asked, Lighthouse 4 talks about the important of low-cost funds to help you achieve your financial independence goals.


Lighthouse 4: Invest in low-cost funds

Wow! Lighthouse 3 has really got me seeing the importance of my savings rate in relation to financial independence! (I hope that’s what you’re thinking). Like in all areas of your life there will be ways to get a good deal on anything, so why wouldn’t there be a low-cost way to invest in the stock market! Well, there is! Vanguard started in 1975 with the goal of keeping the costs of its funds low. What that means to all of its fund holders is that we get to reap the benefits of having more of our invested money working for us.

I shared my story about how I invest with Vanguard, and where you really reap the benefit of keeping costs low with Vanguard is the power, over time, of opportunity cost. The opportunity cost is the amount of money you get to save and invest while other investors are padding the pocket books of their fund managers. VTSMX is a great, low-cost fund that provides broad exposure to the U.S. stock market, it also has a modest 2% dividend yield paid out each year that smart investors will keep re-investing! Money making money!


Lighthouse 5: Automate your life

Automating your life is about identifying repetitive actions you take on daily or monthly basis and moving those actions to auto-pilot. There are things in your life that are important to you such as generating income, spending time with family or travelling. There are also less important things in your lives like making sure you have enough toothpaste in your cabinets. The more of these “less important” things in your life you can automate, the more time you can devote to activities that bring you joy and fulfillment. Automating your life is simple, here a few ways we have automated our lives:

  • All of our bills are on auto-pay
  • Our dogs are fed via automatic feeders and a 10 gallon refillable water dispenser
  • For cleaning, we have a Roomba that vaccums our entire house!
  • Household goods (toilet paper, soap, detergent, toothpaste etc) are delivered straight to our front door using Amazon Subscribe & Save
  • Our retirement accounts (401k and IRA) automatically withdrawal from our paycheck each pay period

These are some excellent examples of the strategies we use to automate our life, they are simple but gain us huge amounts of time. In return we get to spend time playing with our dogs or sleeping in on the weekends. Not only do we save time, but it eliminates the worry of forgetting things like paying our bills or buying household items. This strategy has freed up countless hours out of our week that we can focus on doing what we love!


Lighthouse 6: Focus on doing what you LOVE

Once you reach this step, you will be well on your way to financial independence. You will see your investments begin to grow by the power of compound interest and your early retirement goals will be within reach. So what do you do now that your life, including your investments, are on autopilot? Now is the time to focus on doing what you love. If you are financially independent or on your way to financial independence, you should start focusing on doing what you love.

Whether doing what you love is making short films, real estate, playing piano, writing or physical fitness, these hobbies, although they might not immediately bring in income, have the potential to earn modest amounts of income. But here’s the great news, by the time you reach financial independence, you’ll be able to afford not having a steady stream of income and can afford to spend your time doing what you’re passionate about!


Real Estate

What are some things I am passionate about? One of my passions is real estate, I love the thrill of chasing down a good lead for someone looking to buy or sell a home. Shortly after getting my license, I was able to turn around and use my realtor’s license to purchase the home we’re currently living in, and gosh did it feel good when the seller’s wrote ME a check to purchase their home! 🙂


I hope this light-map helped to solidify your goals and gave you some thought-provoking steps to achieve your financial independence.


What are some ways you automate your life? Are there places in your life to reduce expenses? What do you love to do that you are going to focus on ?




  • Melissa Anthony

    Gosh David
    I love your blog! Tony and I are currently trying to finish Financial Peace University. I’ll share this w him and maybe that will help us to finish those last couple of chapters!

    • Hi Mellisa! I’m glad you’re enjoying it! FPU is a great way to kickstart your financial independence goals! I hope these “lighthouses” help you get back on track and finish strong!

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