These are the Money Mountain Goat 10 golden rules to reach financial independence. Tried and tested for success; ignore them at your (financial) peril!

Rule 1: Invest in your own financial education

The internet is full of fantastic resources to help you start your financial education journey. Heck, the fact that you are reading the MMG blog is a great start in itself! Getting to grips with the basics of personal finance pays dividends, multiple times over.

It was only when I really invested some time did I first come across financial independence as a concept. That discovery changed my life and hopefully now will change yours too. It will (soon) set me free from the daily grind altogether when I reach financial independence myself.

Rule 2: Maintain the highest savings rate you can over the long term

The quickest route to financial independence is to increase your savings rate as much as possible and investing this cash in passive index funds. The impact of this never ceases to amaze me.

The notion of prioritising the “savings rate” as the applicable lever to pull comes from a seminal post by Mr Money Moustache – the Shockingly Simple Match behind Early Retirement. Typical advice is to ensure you save at least 20% of your income each month. This should mean you’ll have enough to retire on in about 37 years (the span of a traditional career). No thanks.

If 37 years seems to long for you (as it certainly did for me), then increase your savings rate. If you can get it up to 70% then you’re good to go in 8.5 years, at 80% its only 5.5 years. Optimise your life, trim spending and increase your savings rate as much as you can. Being frugal and conscious is only part of the picture however, which is why Rule 3 is so important.

Rule 3: Increase your income

As you read around the financial independence community, a lot of focus is put on being frugal. But there’s only so much frugality you can implement. There are various levers you can pull to speed up your financial independence journey. The frugal lever is one of them. The more interesting one however is the income lever.

Lawyers and other professionals are blessed with high incomes, and the sky is the limit. Spend time, energy and effort to increase your income (without letting lifestyle creep then consume the extra cash). Work hard at your job when to secure pay rises, start a side business, you could even write your own blog! Any extra income will help increase your savings rate and over time will light a fire under your financial independence journey.

Rule 4: Don’t leave it to someone else

Managing your money, your goals and your life is YOUR responsibility. One of the worst things you can do is to let someone else do it for you. No one cares about you as much as you do yourself.

Advisers such as wealth managers will usually take a tasty fee for their trouble, and will likely direct your money into expensive actively managed funds. The cumulative effect of these fees could be to pay them $1m or more over your investing life time. With some basic financial education, all of which is available for free across this blog and many others will help you avoid this and take control of your own financial destiny.

Rule 5: Hire fee only, fiduciary advisers

If you hire a wealth planner / adviser then hire one with good reviews and who charges on an hourly basis. Avoid those that only charge on the basis of “assets under management” (AUM) where they charge a percentage of the value of your investments. The AUM model could seem a bargain early on in your investment life, but the cumulative effect of these fees over time is astronomical.

Hiring an adviser who is a fiduciary and charges a fair fee based on the time spent helping you is a better way to go. You may also be able to negotiate flat fee arrangements too. These are is the same fee models which we employ as lawyers. Fiduciaries have to act in your best interest!

Rule 6: Hold appropriate insurance

Insurance needs differ around the world depending on the set up in that country. In general you should keep appropriate insurance covering disability and term life insurance if you have dependents relying on you. Check if you are covered through policies at your employer. The term life insurance can be removed once your investment nest egg is big enough to essentially self insure.

A word of caution – many insurance products are available which include investment components. These investment linked policies are prolific in Singapore, and are generally horrible. The idea is that you enter into one in exchange for some guaranteed returns, the insurance company then takes on the risk. Unfortunately, they also take the majority of the gains too! These companies (broadly) have access to the same investment products as you do. Insurance and investments should be kept separate. Period.

Rule 7: Passive investing trumps active investing (almost always)

Without the ability to use a crystal ball, its hard to know what an individual stock will do next. You may have picked the next Tesla (TSLA), but you may also have picked the penny stock which is about to go bust. Fund managers who manage active investment funds (those where a manager picks which stocks to buy and sell within the fund) also do not have a crystal ball. They are making educated guesses in the same way you or I would do – albeit with access to more sophisticated models and systems.

Its fine to keep some of your invested net worth in your favourite stocks. However, on the majority of your core wealth should be invested in passive index funds. These track an index (e.g. the S&P 500) and deliver consistent returns over the long term. Because an index is a (large) basket of stocks, you would never “lose it all” unless the entire index collapsed – then we have bigger problems! I’ve built my wealth following this method and its the approach most in the financial independence movement also follow. Consider if it is right for you too.

Rule 8: Minimise taxes

There are lots of tax efficient investment vehicles around the world. Wherever you live, you should utilise them to the max. In the UK there are ISAs and SIPPs. The USA has 401K and Roth IRAs. In Singapore is the SRS scheme. All of these provide tax advantages which really add up over time. Its important to understand how such accounts work in your country and how to use them.

Rule 9: Avoid consumer debt like the plague

Stay away from consumer debt and NEVER carry a balance on a credit card. Its definitely ok to use credit cards to reap the rewards, so long as you trust yourself to manage it appropriately and not over spend.

If you are in a lot of consumer debt already, then treat this as a life emergency. Drastically cut all non-essential spending to attack the debt with urgency. Without beating debt, the rest of your financial journey will be hobbled from the get go.

Avoid lifestyle creep. When you get a pay rise, bank it done spend it. Do that over the longer term and you will be amazed how much money you are stashing away.

Rule 10: Protect your nest egg, make a will and don’t wobble

Markets don’t always go up in the short term. But they do in the long term. If markets are down 10%, 20% or even 30%+ wisdom suggests that you shouldn’t wobble. Stay the course and keep invested. When markets go down (assuming you are buying the market using an index fund) consider the ETFs as being on sale, ready to bounce back when the good times return. Holding for the long term increases your changes of obtaining the market average, for the S&P 500 this is around 10-11%.

Make sure you plan your estate properly. Have a will, ensure your loved ones are protected and have things organised in case the worst happens. Its much easier to sort out such things now whilst the sun is (hopefully) shining.

Bonus Rule: Track your progress

If you don’t know where you are today, its impossible to know where you are going tomorrow. Its essential to keep a track on your net worth. This ensures you can calculate your savings rate, know you’re making progress to your financial goals and can set off alarm bells early if things are going in the wrong direction.

I’ve tracked my net worth since I started working as a lawyer, up to my eyeballs in debt. Back then, it seemed I was working for nothing as I had very little to show for it. However, by tracking my net worth I could see that I was chipping away at my my debt mountain month by month. This mental trick helped me stay focused.

Do you agree? Are there any other golden rules which you follow that I’ve missed out?