Everyone dreams of doing what they want, when they want, and where they want, right? But, while becoming financially independent is a goal of many, it seems almost impossible.
While there’s not really a set definition for what constitutes financial independence, it is when you have reached the point that you have enough money saved up that you can live off of it for the rest of your life.
Reaching financial independence is possible. It’s simply a matter of setting your priorities straight. It’s definitely not an easy task, and it will take you some time, but it can be done. The following are eight tips on how to become financially independent with success.
The Top 8 Ways for How to Become Financially Independent:
First of all, in order to become financially independent, you must learn to become a good saver. Sure, investing can help to set you up to become financially independent. However, it is much better if you can save around 25 percent of your income and earn eight percent instead of only saving ten percent and earning nine percent.
A tip that goes hand in hand with learning how to save is to stop spending money. Don’t spend it just to spend. Purchase only those things that are necessary and forget about the rest. You will never be able to become financially independent if you spend it as soon as it comes in. Creating a budget for yourself will help you to get your spending under control.
- Graph your financial information in a crossover chart. This is a line graph that lists your finances: income, investment income, and expenses. Once the income from your monthly investments has crossed over your monthly expenses – that is, your investment income is more than what you are spending, you will know that you have officially become financially independent. Keep track of this budgeting information on a monthly basis.
- Earn some extra income on the side. Find ways that you can earn some extra money- whether by selling some stuff, getting an extra job, investing in dividend stocks, or whatever and put all of that money into helping you on your road to becoming financially independent.
- Understand what things are within your control. Keep in mind that you will never be able to control things such as market returns, inflation, or even natural disasters such as a tree falling through the roof of your home. However, there are some things that you can control, such as your investment expenses, your asset allocation, and your rate of savings. So, optimize those things that are in your control and don’t stress out about the rest.
- Capitalize on your passion. Think about this: what is it that you love to do that you can turn into money once you are no longer tied to a job? Find something that you love to do that still brings in a little bit of money. If traveling is your thing, then consider starting up a blog about travels. If you’re really into sports, then consider coaching a high school or community sports team.
- Consider relocation as an option. Is moving on your list of options? Look around, you might find that it’s cheaper to live in a nearby city or town, or even another state or country. This way, you can save more than you’re spending and thus, learn how to become financially independent.
- Insure only those things that need to be insured, and self-insure the rest of it. There are many people who insure things such as cell phones, computers, and major appliances, but don’t insure their income, health, home, or car. However, as a general rule, always purchase insurance on those things that could cause financial ruin and self-insure the rest of it by building up an emergency fund.
- Another tip for becoming financially independent may surprise you – take care of your personal health. You may be shocked to find out- around 60 percent of all bankruptcies are caused by medical bills. However, by taking care of yourself and not allowing health issues to spiral out of control, you can help to control this risk.
- Finally, get started on your road to financial independence today. You’re never too old- or too young- to get on the road to financial independence. There’s an old saying – “the best time to plant an oak tree was twenty years ago or today.” I’m sure you already know, you can’t go back to twenty years ago- so the best time to start is today.
Becoming financially independent doesn’t have to just be a dream. It can become a reality. Just invest a little bit of time and effort into implementing some of these tips and whatever other information you can find in your online searches.
The time and effort will be well worth it. Hopefully someday, we can all learn how to become financially independent.
Images courtesy of FreeDigitalPhotos.net