Financial independence can seem like a far-fetched concept for many, but it shouldn’t be. The term is used to describe people who do not need to work for their money, it works for them. Keep in mind that financial independence can look different for different people. The journey is not an easy one and it will require education and a plan. You will also need to hit certain financial goals along the way.
Finances are personal to you and your journey will be as well. You can try to imitate someone else’s journey, but it likely will not work for you in the same way. One key thing to keep in mind when you start your journey is that you should not try to keep up with anyone around you.
This can only set you back because you are trying to keep up a facade and live above your means. In the end, you are the only one who ends up losing. Stay disciplined and you can achieve your goals.
Financial Independence is Not a Goal
Financial independence looks different for everyone, and people often focus on it as a goal or destination instead of a journey. Age can also be a contributing factor — for example, if you are in your 20s and 30s, you will have a much longer time to reach your goals compared to someone who is just getting started in their 50s or 60s. However, the journey to financial independence can begin at any age.
When you are looking to increase your income, this does not necessarily mean that you will end up working two or three jobs, either. You can use assets like bonds, dividend-paying stocks, real estate, and more. This is another unique way to add income to your financial portfolio without losing your mind and your time.
Stay within your budget and do your research before investing. You do not want to end up being in the hole instead of progressing. Never accumulate more debt than what you started with as this will achieve the opposite result. Resist temptation and focus on the goals.
Making a Plan
Once you have decided to start on the financial independence journey, you will need to create a detailed plan that works for you. The first thing you will need to decide is why you want to start this journey and what the end goal is. A mistake that is often made is having a lack mindset, when you think that something is impossible it, therefore, becomes impossible. Everyone will have a different financial picture and you will need to get to know your current one in order to plan for the future.
The first step on this journey is to calculate your spending and income. You should get into the habit of tracking your spending and find any potential problem areas. Next, you will need to calculate your goal. You will need to determine how much you want to save or where you reach financial comfort. Once you know where your money is going and your goal you will need to see where you can cut monthly expenses. Cut back where you can, for example, if you have a recurring purchase subscription you can lower your subscription tier or cut this expense completely.
When you do need to go shopping, only buy what you need and use. Do not buy luxury or in excess. This is often one of the biggest problem areas for people but you will need to stick to the plan. You should focus on paying your debts to increase your credit score. You cannot be financially independent if you owe people money. These two points will help you to create good spending habits as well as saving habits. You can make it fun by creating a challenge.
Then you will need to figure out how you plan on making more income. You will also need to consider an investment plan. The key is to make a detailed plan and stick to it as much as possible. You may face pitfalls here and there but always focus on the goal at hand. Never focus on lack or how far you still have to go.
Staying Secure on Your Journey
One thing to consider during your financial planning is security in regards to personal data. Many bills can be set to auto-pay and be done through a mobile app. However, how safe are these methods? Can someone steal your information and wreak havoc on your accounts? In theory, yes. Mobile pay is safe, but the device or the internet connection you are using may not be. It is advised that you make purchases and pay bills on familiar networks and devices. You may be in a hurry to pay that bill but your financial security needs to be considered. The use of mobile wallets can help to secure your card information through encryption and tokenization. However, this means you cannot lose your phone because it will be the same as losing your actual wallet.
What Does Financial Independence Look Like?
Studies have found that 28.5% of people surveyed felt they were financially independent compared to 32.9% of people who believe they are financially dependent. One of the biggest takeaways is that millennials find it hardest to reach financial independence as opposed to other generations. A big majority of people still have their parents paying at least a portion of their bills, and many cannot pay their bills without extra outside assistance.
It has also been found that women reported being more financially independent than men. It has even been reported that people are willing to get married in order to access more finances and be able to pay more bills. On top of that, one of the biggest challenges is owning a home which is often the biggest financial milestone many can ever achieve.
For some, financial independence will mean being able to pay all of their bills without help from parents or other family members. For others, it may mean finally moving out and in other cases, it means having a retirement plan in place.
People often think that if they pinch every penny they will eventually save up enough to be financially free. However, you cannot be free unless you increase your income. This will look different for everything and some people may find opening a business as a step to financial independence. Do not be scared to step outside of the 9-5 life and celebrate every single baby step you take.
Reaching financial independence will not happen overnight and the journey can be filled with twists and turns. Don’t be too hard on yourself and remember you are not alone on this path. There are many people out there who are trying to reach financial independence and you should have a support system in place for when you are feeling down. This will help you to pick the pieces back up and keep moving forward. Financial independence is a journey and not a destination.
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