New Year's Resolution: Financial Independence [Part 1]

Posted By Mark Kaelin

BreakingModern — Just about everybody makes the usual New Year’s resolutions, you know, the ones that are just asking to be broken — eat less, exercise more, etc. I’m suggesting a New Year’s resolution that you can keep for a lifetime. And it’s also one that could pay off in a very big way.

This year I will start working on my financial independence.

Notice how I didn’t say plan for retirement, nor did I say win the lottery and become filthy rich. Achieving a state of financial independence means you are in control of your financial situation to such a point where you are not beholden to anyone. It is a point where you can confidently and honestly say to yourself: I work for me now, not the company that writes me a paycheck.

financial independence numbers

Berkshire Hathaway

When I was in my twenties, playing the stock market and achieving financial independence was something rich people did. But I now know that thinking is so wrong in so many ways. If someone had explained to me the power of youth when it comes to the stock market, I would be filthy rich without ever buying a lottery ticket.

Here’s an example. In 1980, when I graduated high school, I received about $300 in congratulations money. I think I used it to buy a fancy cassette player for my car, both of which are long gone now. However, if I had been smart enough to invest that money in one share of Berkshire Hathaway, which cost about $300 at the time, I would now own a single share of stock worth well over $200,000.

And that is $200,000 without considering dividends earned over 35 years. That is the power of being young, with the ability to be in the stock market over a long period of time. Long-term investing in the stock market means you can ride out the bad times and cash in during the good times. You have the luxury to make mistakes and recover from them. You can take more risk and get the reward that comes with it.

Even Better

Perhaps you’d like an example with more appeal to the tech savvy. Microsoft shares in May 1986, when I graduated from college, were selling for about $1. Apple shares were selling for about 60 cents. If I had taken the $600 I received in graduation money (a good bump up from high school) in 1986 and purchased 300 shares of Microsoft and 500 shares of Apple, this time taking into account dividends and stock splits, I would own a portfolio worth approximately $4.2 million today.

And this is not as far-fetched as it might seem. At that time, I was very familiar with computers and I could see the PC revolution that was coming, especially in the business world. I was certain Microsoft and Apple would be major players. Had I been smarter I could have, and should have, invested in the stock market. Don’t make the same mistakes I did.

Investing for the Future

That is not to say investing is easy or that it doesn’t require time and energy. Successful investing is earned by sifting through information, applying knowledge and anticipating the future. But, when you think about it, isn’t that how we all live in the modern technology-driven world? All you need are the proper tools.

I am writing a series of articles for BreakingModern that will provide you with some basic foundational tools for investing in the stock market. Armed with these tools, and perhaps a thirst for more advanced techniques, you can take the first steps toward achieving the ultimate goal of financial independence.

For BMod, I’m Mark W. Kaelin.