How to Become Financially Independent: 6 Habits That Matter Most

Paul Winkler: We talk money and investing around here, and today will be no different. On this pre-4th of July, Independence Day 2026, 250 years as a nation day, we’re going to be talking about all kinds of things. We’re not just going to talk about investing. We’ll talk about some other things as well.

Tax Efficiency

I’m here with Arlene Brown. Arlene, welcome.

Arlene Brown: Yes. Thank you.

PW: Good to see you. She’s a TV star.

AB: That’s so funny.

PW: She’s a model that goes on TV shows and TV stations, and now we have her in here in the studio, live, to talk money and investing. Good to have you here.

All right. Arlene’s background, for those of you that don’t know, she runs a couple of different offices for us, and she is a Chartered Financial Consultant. She also has done divorce mediation, one of those, and got an enrolled agent.

When did you do that enrolled agent thing? Where did you get that?

AB: Taxation is always a fantastic thing.

PW: Yeah. It’s fantastic for the government. I don’t know that it’s fantastic for anybody else.

AB: Well, understanding the taxation.

PW: Yeah, you have to. You have to.

AB: It’s fantastic.

PW: 

---

We’ve got to make sure that you have tax avoidance, not necessarily tax evasion.

---

AB: We just want to make sure that I can fully discuss with my clients how to make sure that whatever we do, it’s tax efficient.

PW: Right. I just remember so much when we got into taxation in the financial planning designations that some of the ones — well, I’ve got several of them — they all dealt with taxation in different ways just because it hits different areas of your life differently.

But it was just, oh man, who wants to memorize this stuff? Oh my gosh. Oh, you’ve got to. You have no choice.

You have to understand this. If you don’t understand it, you end up in a world of hurting.

AB: Well, you know, the goal is to pay taxes, but to pay just the tax that you are supposed to pay.

PW: Just the right amount. That’s right.

AB: Not more.

How Do You Achieve Financial Independence?

PW: All right. So this is a pre-Independence Day “Investor Coaching Show,” and what we are going to start off with is we’re going to talk about six different ways that you can increase your financial independence. I think that that would be a fun topic for the audience.

Just how do we get to the point of financial independence? Because people, you go through two phases of life. Number one, you work for money. And the second phase is money works for you.

And a lot of times, people don’t necessarily get to the second phase very well. A lot of times, people end up either dependent upon the government, dependent on their kids, dependent on maybe a very small Social Security check, and maybe a little pension if you’re lucky.

But a lot of times, people don’t have the independence that they want. I remember one doctor putting it this way.

He says, “Money used to be the whole thing for me when I was younger. Money was a big deal.” And he says, “As I got older,” Arlene, what he said that was so profound to me was that “I recognize that it just gave me choices.”

And that’s kind of it. People can put money on a pedestal, and they can make it a god, and that can be a real problem, but if you look at it as a tool to express what you value, that can be a whole different ball game altogether.

So what are the six things? And I’m going to start off with this.

---

The first thing is declaring independence from debt on depreciating items. 

---

People often talk about debt, and you’ve heard, Arlene, people say, “All debt is bad,” right?

AB: No. There’s good debt.

PW: There’s acceptable debt. I don’t know if I would call it good, but acceptable.

AB: Okay, but mortgage is a good debt.

PW: No, no. I guess you could call it good.

AB: Okay.

PW: I guess it could be good because you’re doing it on an appreciating item. Like for example, you might actually get debt on your education.

AB: Well, and that’s one of the American dreams, is to own a home.

PW: Right, absolutely.

AB: So, yeah.

PW: And it’s typically an appreciating item.

When Is Debt a Necessary Evil?

PW: Now if you’re careful, it might be okay to have something on a business. Let’s say you buy a business that could appreciate in value, and maybe it’s a business that it takes a lot of money to get into, and therefore, debt is kind of a necessary evil. I may not be able to afford all of the infrastructure in a really large business.

Let’s say you’re dealing with — I’ll just use this as an example because it comes to mind — like a tool and die company. I want to buy a tool and die company. Well, I’m not going to come up with all of the money that it takes to buy all of the equipment that goes into that, and I might have to borrow.

---

But I could make a lot of money on the business itself, and much more than I need to pay back the loan, so it could make sense to do that. 

---

But a lot of people do debt on things that I don’t necessarily get too excited about. Like cars. That’s the first thing that typically comes to people’s minds.

Furniture, I’ve seen that before. People will borrow to get furniture for their homes. And I think, Oh, my God, I’ve seen that. You see that much early on in your career, early when you’re just counseling people, people borrowing money for furniture and those types of things.

AB: Yeah.

PW: Yeah. Yeah. And I just remember one couple that I worked with, and their response when I talked to them about getting rid of that furniture, it was actually leased. They were leasing the furniture, which was even worse.

And it was like, oh my goodness. And I said, “Will you just wait and buy it?”

And they said, “No. We entertain people in our house. And since we entertain people in our house, we got to have nice furniture.”

And I’m thinking, people aren’t thinking about you. They’re not thinking about how nice your furniture is. They’re thinking about hanging out with you.

That’s what’s really important to them, I hope. If they’re not, you may have the wrong friends, right?

But boats, people do that. They’ll buy a boat, and they’ll run up a lot of debt getting that.

Vacations, I’ve seen that before. There was a big talk about … did you see the whole thing about the … there was a World Cup, wasn’t it? How much money people are spending on going to the World Cup?

AB: Oh, okay. Yeah. Yeah. Uh-huh.

PW: Did you see how much that was costing people?

AB: Yeah, the tickets alone.

PW: Oh, it was unreal.

AB: Travel and …

PW: Yeah. Travel, the hotels, and the cost of the hotel.

I had a conversation with one lady, she’s an attorney, and her kids were staying over near where this was happening, and she was telling me what the cost per day was. I was on the other side of the waterway, and she said, “What I paid for an entire week was what my kids paid for a single day.”

I was like, “Oh my gosh.” So that’s one.

How Do You Quickly Get Out of Debt?

PW: You know, credit card purchases, it’s okay to have. Some people say, “Don’t have a credit card. Don’t have it at all.” I’m like, “Nah, I have credit cards.”

I’m what they call a deadbeat. I pay it off every single month. The deadbeat sounds like a bad term, but you pay it off every single month so there isn’t a balance.

But that kind of debt is the opposite of financial independence. Americans had 18.8 trillion in total household debt in quarter one of 2026. I was looking this up. Including 1.25 trillion in credit card debt, and 1.69 trillion in car loans, and 1.66 trillion in student loans.

And credit cards are really especially dangerous because 45% of cardholders carried a balance at least once in the prior year. So a lot of people will try to finance their lifestyle on a credit card.

So anything that is a non-mortgage debt, non-business debt, those are the things that I typically tell people, “Get out of that stuff as fast as you possibly can.” Do you have a way of doing that, Arlene, that you typically recommend?

AB: 

---

Well, I’m always following the 10-10-10 rule. Whatever I do, I always make sure that 10% of my income goes to saving, 10% investing, and 10% giving. 

---

That’s it.

PW: But for the debt, are you doing that before you get to those things, or are you doing it at the same time?

AB: I never really have debt.

PW: No, I’m just saying if somebody does have debt, how do you get them out of it? Maybe you misunderstood my question. That’s what I’m saying.

AB: Well, okay.

PW: So how do you typically approach that?

AB: We have to service the debt first.

PW: So, before you do any savings whatsoever?

AB: Before I do … well, it’s kind of like before I do investing, I’ll do paying the debt, and then the 10% is making sure that I have savings so that I will not go into debt again.

PW: Okay. Yeah. That was interesting, because that was always my philosophy, is I would have people save while they’re paying down debt so that when they got out of debt, they didn’t have to go back into it again. So that’s interesting that you had the same philosophy about that.

And I’m still of the mind, and I’ll get to this in a second, that I would be remiss if I am not taking advantage of employer matches on 401(k)s. Even if I have some debt, I still would do that because that’s free money, and I like making sure that I don’t give up free money, so that was another thing that was really important to me.

Putting Your Mortgage on a Schedule

PW: Number two: Putting your mortgage on a schedule to be gone by retirement is a real big deal to me. I like it because let’s say if I take my income, and I have a level of income, now, what comes out of that income is my mortgage payment and also my retirement savings, and also I would have, like, Social Security taxes.

Now, when you’re retired and you’re just living off of investment money, you’re not paying Social Security taxes.

So you could be saving that, or you’re not spending that money that you used to be spending on Social Security taxes, and therefore you can live on less than you might think that you could live on because that expense goes away. But also, your retirement savings goes away because you’re not saving for retirement anymore, obviously, if you’re living off of the retirement savings.

But the other thing that goes away if you set this up to where it ends at the same time where you retire is your mortgage, and you can have a situation where you’re used to having a certain level of income, but your need for income can drastically drop when you get to the point of retirement because those three things go away.

---

So typically, if I can line it up, I like the mortgage to go away at the same time.

---

AB: Yeah. I motivate my clients to do that so that the mortgage payment, it can go to their travel expense.

PW: Oh, that’s a neat idea. No, I like that idea, because they’re used to spending the money already.

Now you just get them to force them to go and do something. Go have fun. No, that’s an interesting idea. I hadn’t really thought about it that way.

So that’s another thing. So if you look at people in their 60s and 70s and 80s, they’ve got mortgage balances. Mortgage balances stood at 13.19 trillion. So that’s a huge amount of money that people have.

So try to choose a target retirement age and ask, will my mortgage be gone by then? And if not, calculate the extra monthly payments that you need to make to have that done that way.

It’s super easy to do on a mortgage calculator. The financial calculator, you have PV, which would be, PV is present value. That’s how much your mortgage is.

FV is going to be future value. You want that to be zero because the mortgage is going to be gone. And then you go PMT is going to be payment.

AB: Payment.

PW: That’s what that stands for, and that will be what your mortgage payment is. And then you’ll have your interest rate or your R, or your R per year or whatever. It might be something like that. It varies based on the calculator.

And then you’ll have your N is your number of payment periods. You can actually play around with that and get to the point where you figure it out. And this is something, if you’re not comfortable doing this yourself, work with a planner to do it because that’s really important to figure out how much I have to put away to get it paid off when I plan on retirement, and getting that point and having them line up with each other.

Paying Yourself First

PW: Another thing is paying yourself first. This is the very first lesson that I ever learned is you pay your mortgage, you pay your car payments, let’s say if you’ve broken the first rule.

AB: No, I’m laughing because it’s like —

PW: Why are you laughing?

AB: It’s like, now you pay God first.

PW: Well, okay. Okay. Okay. All right.

AB: I’m just being …

PW: So be ornery with me.

AB: Yeah, I know.

PW: All right. All right. This is from the richest man in Babylon. That was something that was really important. And yeah, that was one of those things.

---

I had a guy that said to me, “Paul, when I gave, I never missed it.” And he was right. I never missed it when I gave, no matter how low my income was. 

---

But yeah, so pay yourself first is just putting money aside for you, because we typically think about paying our phone bill, we think about paying for electric bill, we think about paying for gas bill, and we think about all of these things that we pay, and then we often don’t think about the fact that maybe you ought to pay you first, and then everything else is secondary. And that is particularly true with 401(k)s, retirement plans, 403(b)s, similar types of plans like that.

You can put up to $24,500, and with a simple plan, you get a $17,000 contribution if you’re self-employed, and then the IRA limits $7,500. And there are different levels of how much you can put in these different types of programs, depending on what you have access to.

But for people that are working for somebody else, you will often have matching contributions if you will step up to the bar and put money away and have that money go away, because as Jane Bryant Quinn, who’s a financial columnist for Newsweek for many, many, many years, once said to me, she said, “That was the first piece of advice I was given. ‘Jane, put money away,’” and said, “You know what happened?” And I said, “Probably you didn’t miss it.”

And she goes, “Exactly right, Paul. That was exactly right; I didn’t miss it. I didn’t think about it. When I put it away, I actually set my budget up around a lower income, and it worked out really, really well.”

Building a Freedom Fund

PW: Another thing is, and Arlene already referred to this, number four, building a freedom fund, not just an emergency fund. And you’re putting money away, and the debt often begins where cash reserves end.

And there was a household survey that was done. Only 63% of adults said that they could cover $400 emergency spending with cash savings or credit card. And then what they had to do is they had to borrow money.

They had to use a credit card, and only 55% had three months’ worth of expenses set aside. So about half of people have what we routinely talk about, having three months to six months’ worth of savings set aside so that if something happens, you don’t have to borrow to do that. And Arlene, anything on that?

AB: Yeah.

PW: Do you have a certain level that you get them to start with? I hear some people say, “Start with one month’s worth of income, setting aside just anything.” And typically, what investment vehicle do you use for emergencies?

AB: Oh, cash.

PW: Like money market accounts?

AB: Yeah. Uh-huh.

PW: A savings account.

AB: I mean, because it’s not about the interest, how much you earn in that account. It’s basically liquidity, making sure that it’s really there, available.

PW: Yeah, I think that’s exactly right. I have some people say, “Let me start, put in a stock fund or something like that.” I’m going, “Well, no.”

Just when you need it, the market’s going to be down. So nah.

Another thing is increasing your earning power. Number five of my list. And financial independence, I actually gave a speech one time for a commencement, and that was one of the last things I said to the students.

I said, “This is a commencement. You’re starting out. You’re getting ready to graduate from college. Don’t stop your education right here.”

---

“Keep going. Keep learning new things, because technology is going to make you obsolete at some point in the future.” 

---

And what are we seeing? I mean, right?

AB: Yeah.

Learn Something

PW: We’re seeing AI, people are being really worried about AI. I do a lot of work over on the board of advisors over at Trevecca, and one of the things we talk an awful lot about is how do we get kids to learn how to use this as a tool so that they don’t become obsolete. And for me, I’m always using it as a tool to make myself more productive, learning how to use these types of things.

There’s studies about how much the income difference is between different levels of education. I won’t get into that. It doesn’t mean you have to have a college education, getting trade school and going into some kind of a trade and learning that. Just learning something, anything.

AB: Skills.

PW: Yeah. And what’s an action item here for me would be picking a marketable skill to improve this year, and maybe learn sales. I mean, huge.

Go pick up a book on sales, because you’re always selling yourself. Learn communication.

Get into maybe taking a public speaking course or something like that. Learn leadership, read books on leadership.

AB: And critical thinking.

PW: Oh yeah, absolutely. Critical thinking is something that’s going by the wayside. We’re letting other people think for us. That’s a really good one, Arlene.

Yeah. And maybe get a technical certification, trade skills, industry-specific credentials, something like that.

And then finally, hold regular financial independence meetings. My father used to do this all the time. You knew that one Saturday every single month, Dad would be sitting at the table, bills spread out everywhere. He was organizing everything.

He would have quarterly financial reviews on the calendar. That was the thing that he would do.

Work with a planner, just because we don’t know what we don’t know. It’s having a level of knowledge outside of ourselves. You can’t solve a problem with the same level of consciousness that created it, as Einstein said.

AB: And also, within family, not to be afraid to talk about money.

PW: Yeah. Yeah, for sure. Yeah.

Talk about it with other people in the family because they may have input. Spouses.

I tell the husband and wife, “Get together; talk about this stuff. What are your goals? What do you want to do? What do you want life to look like?”

---

Because if you don’t come up with a goal and you don’t come up with what you want life to look like, you’re like a ship going out there with no rudder. 

---

You’re going to just go wherever the wind blows you. So I think that’s good stuff.

So those, in the spirit of Independence Day, those are six things that I think are important to do to get to independence for you and your family. I’m Paul Winkler. We’re going to get into some investment topics here in just a second.

Your True Purpose for Your Money

PW: Arlene, I was telling you that I saw something about the expense of travel that people are incurring.

AB: Oh, yeah.

PW: And I found it. It was, “When Did Having Fun Get So Expensive? The Summer When ‘Funflation’ Went Wild.”

And I think about the true purpose for money. We have this saying, “Money is just a tool to express what you value, what’s important to you,” right?

AB: Mm-hmm.

PW: What’s your true purpose for money? Do you remember?

AB: It’s really just —

PW: Don’t tell me you don’t remember.

AB: No, no. It’s really just financial freedom.

PW: Okay, financial freedom is yours? Okay.

AB: Yeah. Uh-huh, being able to do whatever I want to do with my family.

PW: Okay, okay. All right. So that’s an exercise I’ve done for years.

I remember the very first time I did, it was making a difference in people’s lives. That was the very first thing.

And then what it became is just connection, you know? If I make a difference in people’s lives, I connect, you know? It’s kind of what my thing is. But people have different things.

---

What is money? It’s just a tool to express what you value. 

---

And a lot of times, people think, Have a huge house. I’ve got to really have a huge, huge house. I’ve got to really have a nice house. 

Why? Because I’ve got to impress people that maybe I went to high school with that never thought I was worth a darn when I was in high school, or thought I was a loser, and I’m going to show them I’m not a loser. Look at my house.

AB: That’s a very positive revenge.

PW: “Yeah, I’ll show you. Look at this. As a matter of fact, I’m going to put my house on Facebook, and I’m going to put my Maserati on Facebook too. And I’ll show you I became something.”

AB: Revenge through success.

PW: Isn’t that funny?

AB: That’s okay.

PW: But it’s true, when you think about it. When people do that, and you go, “Well, why are they doing that? Why are they really doing that?”

Because they want to connect. They want to be important. They want to connect with people, so they’re doing it through a means that actually creates disconnection.

Because what happens when you have a better house than anybody? What happens when you have a better car than anybody? What happens if you have better everything than everybody? They’re jealous of you, right?

AB: Okay.

PW: Come on. Is that not true?

What Are You Saving For?

AB: But then what happens is that abundance becomes ordinary.

PW: Abundance becomes ordinary? It’s anything but ordinary. Look around us.

But look at what they say. I think this is funny, this picture of these people jumping around. They’re wearing American flags and all this stuff, and they’re talking about how they went on this trip to the World Cup, this couple, and they, a married couple, go to the World Cup.

They had nearly $10,000 to travel to and to see the games. And they said that tickets, $800 a piece is what that cost.

Forget trying to see their favorite squads. Game day parking, $175 at the stadium. And then car rental, and hotel, and commuter train tickets.

And they’re just going through all of this stuff, and I was like, gosh, just thinking about when I was a kid. Arlene, you know what we did? We pitched a tent on a campsite.

And you know, the biggest thing that we did is we just would go to the little porta potty thing or whatever the heck it was. I mean, it was a cheap vacation.

And I look back, and I go, “No matter, my dad ended up, when he passed away, he had so much money.” He never spent any of it on that stuff.

I don’t know. Maybe I just talked everybody out of saving money on vacations with that one.

AB: No, but I do save a lot for vacation. Like, you could never see me at a Starbucks, okay? I never spend money —

PW: Okay, no Starbucks for you.

AB: No. Uh-huh.

PW: Okay.

AB: I’ll save that money from Starbucks for vacation.

PW: Well, yeah, because you’re like, “What is really important?”

AB: Yeah, uh-huh.

PW: And I think that’s the point that I wanted to make. And for you, the true purpose, it was freedom, the true purpose for money, but it was deeper than that.

AB: No, for family.

PW: Because you’re a connector.

AB: Mm-hmm.

PW: You’re a connector.

AB: Mm-hmm.

PW: So I would say, no, connection is a big deal for you as well, and family. Yeah, yeah, good. Family. Connecting with family.

---

So what you do is you think about how everything that you put money aside for is for greater connection with family. 

---

About right?

AB: Yeah. Mm-hmm.

PW: All right, there you go. See? That’s it. That’s how we do this stuff.

Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.