How to Achieve Financial Independence: 8 Steps
What would your life be like if you didn’t have to work a full-time job? How would you fill your time? How much weight would be removed from your burden-heavy shoulders? This type of financial independence is possible with discipline and certain calculated risks.
What is financial independence?
Simply put, financial independence is the ability to cover your living expenses without the need to work a full-time job.
How do I achieve financial independence?
Take an assessment of where you are in life.Are you young? Middle-aged? A lifetime of sound money management decisions is the conventional method to financial independence. Because time is on their side, young adults have the opportunity to reach financial independence by retirement age with this method. However the middle-aged may achieve independence as well – with determination and the help of non-traditional methods.
Make disciplined spending decisions.
Don’t deviate from your plan and spend indiscriminately. Financially secure individuals do not live beyond their means, buy vacations homes, purchase new cars, and borrow against their 401k.
Embrace austerity.
Pinch those pennies to preserve wealth! Financially independent people are extremely careful with their money. Get creative with ways to reduce everyday expenses, such as obtaining DIY skills, couponing, gardening, buying secondhand, and more. This will allow you to redirect those unspent dollars towards investment opportunities.
Pay down existing debt.
Try to eliminate all of your debt by age 30, beginning with high interest debt such as credit cards and auto loans and working your way down to lower interest debts.
Become financially literate.
Financially knowledgeable people end up with more wealth than those who operate in ignorance. Devote time and effort to becoming knowledgeable in personal finance and investment to help ensure financial independence later in life. The more knowledgeable you are, the more mistakes you can avoid.
Be an active investor.Your 401k is a good start, but you will also need to educate yourself on - and take part in - other investment opportunities. Look into standard exchange-traded funds (ETFs) as well as more sophisticated investment strategies such as dividend producing investments and real estate holdings. Consider nontraditional opportunities.
New or improved products and services offer the opportunity to build wealth in a short time. Other nontraditional approaches such as writing a book or a screenplay can produce major income as well. Look into your strengths and get creative to expand your wealth!
Grow exponentially.Build on your success by taking calculated risks - such as expanding your income by adding a second rental property after your success with the first one - and continuing building from there. Keep thinking “bigger and better,” increasing property and business ownership with each increase in your personal fortune. Let go of failure.Setbacks happen and often offer learning opportunities. Don’t let failure put a stop to your quest for financial independence. History is full of entrepreneurs who built a great deal of wealth only to lose it all and then regain it again in the future – often in a completely different way.
Ask for help when you need it.
Seek professionals and successful investors who have achieved financial independence themselves and have knowledge about personal finance. Nobody said you have to do this entirely on your own. Plus, being in the company of successful investors will help keep you motivated.
Look in the mirror and make the commitment to yourself and financial independence. Your future is waiting for you – you have but to shape it!
Tags: Financial Independence, Retirement
IMPORTANT DISCLOSURES PRIVATE WEALTH CFOs LLC does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable--we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.