If you’re like me, then you have a dream to become financially independent- it’s an admirable goal. But why do so few people actually become financially independent in New Zealand?
Financial independence doesn’t happen overnight- and that’s where the problem lies.
It takes a detailed plan and years of willingness to commit to the plan before you financially become financially independent in New Zealand and any other country around the world. There’s no instant gratification involved- and that’s hard in our ever-increasing fast-paced world.
So what do you need to do to start your journey to financial independence? here are 10 steps I believe you (and I) need to take to become financially independent in New Zealand.
1. Sacrifice Today for the future
Have you ever heard the expression YOLO?

If you live by the motto you only live once- you will never become financially independent. YOLO is one of the reasons that more don’t reach financial independence- they’re afraid of missing out today for the fear of not being around tomorrow.
Afraid to sacrifice small aspects of their lives to get financially ahead- after all you only live once, so you might as well spend all your money right now.
When you first start on your financial independence journey- it’s important to remember that you don’t go from zero to hero overnight- it takes decades. I started when I was in my twenties, and I probably won’t be financially independent before I’m about 50- that’s more than 30 years- three decades.
When I wanted to become fit to climb Kiliminjaro, did I go all out on huge hikes on day one to start my training? No. I started small. And over time, build up my fitness. If you start too aggressively- you will burn out. The brighter the light, the faster the burn.
It’s the same when it comes to saving. You don’t need to start off by saving 50% of your paycheck. Start with a small amount- let your lifestyle adjust to having a little less money. Then increase the saving rate again. As you start saving more and more over time, you won’t even notice not having the money to spend. It’s about building a savings habit.
Before you can move away from the YOLO mindset and towards a financial Independent mindset, you need to get be clear with yourself on a few things:
- What does financial independence mean to you?
- What is your current financial situation?
- What are you willing to sacrifice to gain financial independence?
- What is holding you back from starting the journey to financial independence?
I like to contemplate these questions every now and to keep myself motivated. After all, financial independence is a long-term goal, so you need to keep yourself motivated.
2. Create Several Smaller Financial Independence Goals
If you only have the goal of becoming financially independent, then you’ll probably not make it. Why? because it’s not a specific goal, although it is a measurable goal. You’ll need to create a series of smaller goals to reach financial independence.
I can’t help you out with your personal goals, but to get you thinking, here are a few goals I currently have:
- Increase my income year to year
- Control my spending
- Reach my investment goals
- Optimise my insurance every year
- Minimise my car use/bike to work more
In reality, they’re more specific than that- but you get the gist of them. There are many areas in your life where you can make goals that will help you achieve financial independence in the long term:
- Debt repayment goals
- Mortgage goals
- Owning a home
- Savings goals
- Lifestyle goals
- Career goals
Whatever your goals are, each time you achieve one, you will move your entire financial situation forward to financial independence.
And these goals may change over time, and that’s ok. At first, I figured I’d pay off my mortgage as fast as I could to become financially free- but once it’s paid off- you can’t eat your house. So, now I’ve moved onto a more balanced approach- where I still pay off my mortgage aggressively but also invest regularly into index funds.
3. Follow the steps to Financial Independence
There are really only four steps to financial independence if you step back and look at the big picture.
- Save as much as you can
- Invest those savings
- Calculate your FI number
- Retire
That’s it- four steps. It might seem oversimplified to break financial independence down to just four steps, but I believe that’s all it really takes. Earn, Save, Invest.
Each of these steps can be challenging. There are many details in each that you will need to work out for yourself. Once you’ve worked out the basics, it just comes down to discipline and delayed gratification.
And you don’t need to have each step worked out and solidified from day one. They will change over time, just like your life will change over time. I now save much more than I used to because I now earn more. I have changed my investment strategies over time as I become more knowledgeable about investing. Your financial life is not fixed from day one- it changes over time.
As long as you start saving now, start with saving absolutely anything, over time, you will learn more.
You don’t need to have everything figured out from day dot. I certainly didn’t and still don’t have everything figured out. It’s still better to start not knowing everything than to not start until you think you know everything about money. Trust me, there’s always more to learn.
4. Live a Humble Life
This is one of the more important concepts you need to master on your journey to financial independence. It’s linked to the sacrifice idea I talked about earlier. Unless you live a humble and modest life, you will not achieve financial independence.
Some people call it “living below your means”- I don’t like that term. It emphasises too much the sacrifice aspects of living a modest life. Rather, I like to stand back and look around. Look at what you have and be grateful for that!
Commit to Living Below Your Means
If you flip the idea on its head- from living below your means- to living above the means of much of the world- then you’ll find it much easier to sacrifice certain things. The standards of living in New Zealand are great for the vast majority of Kiwis.
Think about this simple aspect of your everyday life- isn’t it wonderful that you can go to the bathroom and your waste can be flushed away? Without you having to deal with it after that. With a button- poof- it’s gone. Sure, it’s an externality that is paid by using our tax dollars- but it’s really something to marvel at.
There are parts of this world where this happens in the streets or in latrines. And then, once the latrines are full, they are emptied straight into the nearest rivers. Remembering this one fact makes it easier to live modestly. We have so much, and yet some people are so ungrateful and want more.
Once you start to look around and become grateful for what you already have- it’s easier to pass on buying the latest iPhone, or needing the latest clothing to keep up with fashion. Keeping up with the jones, buying the latest model car. It’s all just not that important. Don’t fall into the consumerism trap!
You have a roof, water from the tap that’s safe to drink, a sewer system, a country in peace, relatively low crime, an uncorrupt government, and natural wonders that are the envy of the world. So much that is taken for granted.
Live modestly and take stock of what you already have.
Delayed Gratification
Going beyond living modestly, you need to master delayed gratification on your journey to financial independence. Be prepared to sacrifice now in order to have a better life in the future.
Instant gratification is so easy, especially with all the financial services available to use all- like after pay, car loans, and hire purchases. If you really need something (see how I said need something and do not want something), save up the money for it.
Add it into your budget- and only purchase it when you have enough money to buy it outright. You’ll be delaying your gratification, but trust me, when you finally do purchase it, you will have much more gratification than if you had ticked it up on a loan with future payments looming over you.
In terms of becoming finically independent- it’s the same idea- you need to delay gratification in some aspects of your life now so that in the future you will have a better life. You might choose not to upgrade your car as often, not move up the property ladder as often, or keep wearing the same clothes until they are truly worn rather than buying new clothes.
There are many areas in your life where you can delay gratification in order to get ahead financially.
5. Automate Your Finances
Let’s face it- most of us do not want to manage our finances. It’s much easier to just automate them.
Automating your finances gives you more time to focus on your life- allowing you to wake up every morning knowing that your money is managing itself. Your bills are paid on time, your savings are automatically done for you, and you can even automate your investments.
Automating your finances is a necessary step you need to take on your journey to financial independence- never overspend and never stop saving and investing.
The way I go about automating my finances is to know these key items:
- When you get paid
- What is your pay cycle
- What are your regular bills
- How much have you budgeted to save
- How much have you budgeted to invest
- How much have you budgeted to spend
Once you know all these items, you can automate your finances.
The day after I get paid- my automatic payments move money to my savings account, investment account, bills account, and spending account. (You may not have that many accounts as some banks charge extra for more accounts- BNZ offers multiple accounts for a fixed fee)
Here’s a flow diagram of how I’ve automated my finances.

My savings account is for short term, savings-such as for holidays etc. It also acts as my emergency fund.
The power of automating your finances is phycological. You don’t have to worry about saving money as you are paying yourself first. You don’t have to worry about overspending because you can only spend the money that you have allocated to spend.
You can easily predict how long it will take for you to become financially independent because you know exactly how much you are investing in every pay cycle.
Automating your finances works! think about your KiwiSaver account– that is all automated- you don’t even notice it- yet month after month, the balance in your KiwiSaver account grows.
Granted- if you are an independent earner or contractor- your pay cycle isn’t very predictable. And then there are all the tax issues etc. Have a look at Hnry– they have a service aimed at independent earners- although the fee is close to 1% of your income.
6. Invest your Savings
Once you have your finances sorted and a small emergency fund- you can start to think about investing your savings. Investing is important. Investing is all about using your money to earn more money, hopefully in a passive manner. The larger your investment portfolio becomes, the more money it can potentially earn, and the closer you are to financial independence.
You might think that if you’ve paid down all your debts and stocked an emergency fund, you can slow down with your saving and investing. Wrong! If anything, you want to increase your investing efforts. The sooner you invest money, the more time it has to grow.
If you start investing at age 20, and you want to retire with 1 million at age 65- you only need to invest $382 a month. That is because you have 45 years of time for your money to earn money.

If you start investing at age 45, and you want to retire with 1 million at age 65- you need to invest $2,206 a month, or about 500 a week. Considering that the average median income for a Kiwi aged between 45 and 49 in 2018 is $1260– that would be a large chunk of money to invest- about 40%.

Starting at age 20, you only contribute $206,000 to your investment portfolio to reach 1 million when you retire, and if you start at age 45 you will need to contribute more than double at $530,000 to retire with 1 million.
The basics of Investing
The topic of investing is huge. There are many investing tips and tricks to learn. But that doesn’t mean you shouldn’t start right now. Even if you don’t know anything, you can start now with a small amount. This way, you will learn as you go.
To start you off- here are 10 tips about investing. Read more about investing here.
- Past returns on an investment are by no means a guarantee of future returns- they can only ever be seen as a guide.
- You need to diversify your investment across different asset classes, industries, funds, and even countries.
- Re-invest your divined income and allow the 8th wonder of the world, compound interest, to do its thing.
- Generally, the higher the returns on an investment, the higher the risk.
- A large proportion of your investment should generate money, Cash, Shares, and Property, avoid over-investing in assets that don’t, such as Art.
- Don’t be discouraged by short-term volatility, shares will move up and down throughout the day- you should only be concerned with the long-term trend.
- When comparing investments, make sure the returns you compare are the same. Don’t compare apples to oranges. Some returns are calculated gross, and some are calculated net.
- Use dollar-cost averaging for volatile investments, this lowers your risk of timing an investment.
- Investing is a long-term endeavour. Don’t check your investment every few days.
- If possible, seek professional advice and independent advice. Be wary of getting rich investment advice from friends and acquaintances.
7. Ensure you have Coverage
If you are anything like me- you don’t like paying for insurance. And if your goal is to become financially independent- you might think that you should only have a minimal amount of insurance possible to keep your insurance expenses low.
But the thing is that as your wealth grows and your career progresses, you need to increase your insurance coverage. You want insurance to protect the assets that you have. Be it our home, car, career, or health.
Insurance is not often talked about in the financial independence community. But it is important. The more financially independent you become- the more wealth you are likely to have. Therefore your insurance will also need to increase. Otherwise, a major event may see your financially independent lifestyle go down the drain.
In saying that- you can still try to decrease your insurance expenses. There are a few ways you can save on insurance. You can increase your premiums and only use insurance for big events. You can shop around for deals when your insurance renewal comes in the post. And you can pay annually instead of in smaller monthly or weekly instalments.
If you’re shopping around for car insurance and you’d like to get the first month of your insurance free, then consider getting a quote with Cove- an NZ-based car insurer. If you decide to switch to them using my link, they’ll give you the first month free (Up to $100), and they’ll even offer to help cancel your current car insurance policy.
8. Get out of Debt and Stay Out
Whatever the reason for getting into debt, there are always ways to get out of debt. And to minimise the cost of your debt. And once the debt is gone, stay out of debt. You don’t want to be drowning in debt.
Debt is a quick solution to desires. Debt may afford you the luxury of having things now. But you will pay for them later. And more often than not, pay dearly. If you borrow $1000 at a personal loan interest rate of 18%, and pay $50 a month. You will pay an extra ~$200 for the privilege. And the more debt you are in, the more you pay for it.
There are a few methods for paying off debt faster. The two most common approaches are the Debt Snowball or the Debt Avalanche. The secret to both is that you need to budget for extra repayments over and above the minimum payment. The differences are where you direct these payments.
Debt Snowball
The Debt Snowball method suggests you pay any extra payments to the debt with the smallest balance while paying the minimum on the larger debts. Once the smallest debt is paid off, you shift the extra payment to the debt with the next largest balance. And so on, until finally, you have paid all the debt off.
Debt Avalanche
The Debt Avalanche method suggests you pay any extra payments to the debt with the highest interest rate first. This results in the most cost-effective repayment strategy, meaning you will pay less in interest charges. Once the highest interest rate debt has been paid off, you move the extra payments to the debt with the next highest interest rate.
Which is better?
Which method is better? the debt snowball or the debt avalanche? Here is the truth. Stop focusing on which method you are going to use and just start paying down the debt. The first step to eliminating debt is to tighten spending in every category of your life and transfer this to your debt.
Want to go out for lunch? You can’t- you have a debt to pay. Want that new phone- you can’t, you have a debt to pay. Want to watch a movie- you can’t you have a debt to pay. You can see that what you have to cut from your budget are all the “wants”. Once you have paid down all your debt, you can start to save so you can spend on all your wants. Then you can stay out of debt.
Remember that debt is just compound interest working against you! And to get ahead financially, you need to get rid of it!
9. Diversify your Income
Just like diversifying your investments, you should also look to diversify your income over time.
We tend to spend a lot of time on how we are going to diversify our investments- how much are we going to invest in stocks, how much in bonds, how much in peer-to-peer, how much in real estate, etc. But we don’t spend much time thinking about how we are going to diversify our income in the long term.
Relying on only your job for income is something we should put more emphasis on. What would happen if you were unfortunate enough to lose your one job? How quickly could you get another job? would it pay the same as your current job?
The normal answer is that it would take twice as long as you’d expect, and you have to take a pay cut.
That’s ok- you’ve got your emergency fund sorted– that is exactly what it’s for. And that is true. But taking a pay cut will hinder your long-term goals. It’s better to look into how you can earn extra money early on before your company downsizes.
There are many ways you can earn more money on the side- even if it’s not that much. You could sell your skills- become a function photographer, take on small side contracts, start an online store, sell produce locally. Whatever it is, it doesn’t have to make a large amount of money- just getting the experience of hustling for money will afford your options if you lose your main source of income.
And you could just be investing with dividends in mind- it’s still income. The income you need to survive. You cannot live on the equity you have in your house without going into more debt- you can’t always sell your shares without taking a hit.
Diversifying your income is something you should focus on over the long term.
10. Refocus Periodically
The last step might seem obvious, but it’s still something that you need to have in the front of your mind. You need to refocus periodically on your goals. Schedule some time, maybe yearly, quarterly, or monthly like I do, to go through your finances and check where you are at. The two things this should help you focus on are;
- To ensure you’re on track to reach your goals, and
- To keep yourself focused on your ultimate goal of becoming financially independent
This is important to do- you might get halfway to your goal and start getting very comfortable in your spending and investing. You see that your investment portfolio has grown to an unbelievable size. Then you might find that you start to spend more money and invest less. I’m doing so well- why don’t I just take a little break?
Refocusing periodically will help you renew your commitment to financial independence, and you should do it at least annually- if not more often.
Becoming finically independent isn’t easy by any means. You need to make a detailed plan to get there. And then you need to commit to that plan for more than a decade.
Wrap up
So that’s it- Those are the steps I think you and I need to reach FI.
- Sacrifice Today for your Future
- Create Several Smaller Financial Independence Goals
- Follow the steps to Financial Independence
- Save as much as you can
- Invest those savings
- Calculate your FI number
- Retire
- Live a Humble Life
- Automate Your Finances
- Invest your Savings
- Ensure you have Coverage
- Get out of Debt and Stay Out
- Diversify you Income
- Refocus Periodically
You will get there- as long as you don’t give up along the way.

Visit my Resources Page to find out how you can get 50% off Pocketsmith!

Use This Link to get 1 month Free on any new car insurance policy
Information presented on the Website is intended for informational and entertainment purposes only and is not meant to be taken as financial advice. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through. Please note that I only recommend products and services that I have personally used.
Hi I am Derek and am curious what is your name? You certainly have worked incredibly hard at this website. Wow.
Thanks