Financial Independence is a state where your investments make enough money to cover all your living expenses. This means if you were to become jobless, you wouldn’t have to worry about your finances because your savings and investments would cover your cost of living forever. This period of financial independence usually begins around the age of 65 and is commonly known as retirement. But, with consistent effort and growth, it can come much sooner.
It’s not often or to a great extent that we’ve been taught about money. We’re thrown into the world after high school or college and expected to make the dollars work. Our income should afford our lifestyle but even that can be hard. On top of that, the American economy is built upon people spending more money than they have. Credits cards and loans allow people to spend excessively and then high interest rates make it difficult to pay it all back. All of this causes immense financial stress, an inability to increase your wealth and keeps you in the rat race of always needing that next paycheck to survive. But the journey to financial independence can stop all that. Once you visualize your future and have life goals you want to accomplish, you can setup a path to success. This path starts with building a budget that facilities your current lifestyle wants and needs while investing in your future. These investments in your future with an emergency fund, retirement account, savings account, and brokerage account will provide you with financial security and flexibility. And the more heavily you invest in them, the sooner you’ll be at that point of financial independence. A place where money is barely a factor in your day-to-day life, and you can make decisions based off passion and purpose alone. It’s not impossible for most to reach that at 55, or 45, or even 35 years old. But it takes work and these steps below are path I’m taking to reach financial independence.
This pursuit of financial independence has brought a number of benefits into my life and many others. To name a few:
If you’d like to begin your journey to financial independence, here are the 3 steps I recommend.
Define Your Future Lifestyle
Dedicate a hour every year to visualize what you want your life to look like in the future. Then set financial goals to support these visualizations.
Create and Maintain a Budget
Schedule a hour every year to create or update your monthly budget. Schedule another 30 minutes each month to analyze your cash flow and spending habits.
While this 3-step guide may seem obvious and easy to implement, it’s far from it. To make changes in your life, it requires a significant portion of time to educate yourself, develop a personalized plan, implement the changes and retrain your habits. Despite the process being difficult, as with anything, it gets easier with consistent effort over an extended period of time. Try focusing on one step of this guide for a month. Monitor and manage your progress each week. And then once you’ve got a good handle on it, move on to the next step. Because…
Small disciplines repeated with consistency every day lead to great achievements gained slowly over time.John Maxwell – The 15 Invaluable Laws of Growth