Who wouldn’t want to be debt-free, rich, and able to invest for the future? That’s the dream of having financial independence and freedom. Financial independence means having enough money to follow your passion without stressing about your income. For some, it means living by their own rules. For others, it means meeting their needs and saving for retirement.
Whichever way, one can adopt and nurture habits to achieve financial independence and control over finances.
1. Define your financial independence
The road to financial independence has ups and downs that can be hard to swallow. Before you make any progress, it’s vital to understand the importance of financial independence. One should master the benefits of having a significant nest egg and the freedom it comes with. It’s a sure way of overcoming all the stumbling blocks along the road in the race for financial freedom.
2. Have Crystal Clear Financial Goals
One of the brilliant ways to achieve financial independence in less than ten years entails setting precise financial goals. To set measurable goals, be specific and plan for the short, mid, and long term. Write them down and break them into bite-sized steps.
Some of the most important financial goals include:
- Paying off debt
- Setting up an emergency fund
- Saving for retirement
- Strive for homeownership
- Pay off the car
- Plan for fun
3. Learn How to Budget
You need money management skills to achieve financial independence. You also need planning and budgeting. Budgeting helps you reach financial independence in ten years or less. How can you reach your goals without knowing where you money is going each month?
4. Cut Back on Wasteful and Unnecessary Expenses
Want to grow a big savings egg? Cut your costs and free up cash. Pay off debts and save or invest more. The quick path to financial independence is to save as much as possible (those that want to retire early might save as much as 80%o of other income). Some smart ways to save money are:
- Saving on utility costs
- Consolidating debts
- Eating at home
- Plan your shopping ahead and resist the temptation to buy on a whim.
- Save on interest where possible
To be financially free, save more and spend less. Your savings rate is how much of your income you save or invest. For example, if you make $70,000 a year and spend $14,000, your savings rate is 80%. To save more than 80%, make more money.
5. Create Additional Sources of Income
Financial experts encourage finding as many as five streams of income that help supplement the regular paycheck. Some of the best ideas for additional sources of income include:
- Affiliate marketing
- Peer-to-peer lending
- Sell items on e-commerce platforms
- Create a blog or YouTube channel
- Invest in high-yield savings accounts
- Invest in REITs for rental income
6. Negotiate for Goods and Services
Negotiating saves you money and gives you value. It is a great way to get discounts and free up some cash for other things. Buying in bulk or being a loyal customer helps you negotiate better deals.
This applies to utilities, food, clothing, and more.
7. Take Care of Your Health
High healthcare costs can hurt your savings and freedom. The average health insurance is $456 per person and $1,152 per family per month. Staying fit and eating well can protect your health and lower your medical bills. Taking care of yourself can save you money and help be you financially independent in ten years or less.
8. Grow in Your Career
Don’t stay in a job that barely pays the bills. Choose a career that has growth and income potential. Even if you start low, look for opportunities to earn more and save more. ADP chief economist Nela Richardson says a good career boosts your income by over 8% annually. You can also ask for bonuses or flexible options.
9. Keep an Emergency Fund
An emergency fund is vital for shielding oneself against unexpected life events such as health emergencies, car repairs, school fees, etc. Having cash to care for unexpected life events prevents the risk of plunging into unnecessary debts. It also leads to peace of mind, which is critical to the financial plan.
10. Live Below Your Means
Digging deep into spending habits and cutting back on unnecessary spending is a sure way to live below one’s means. One of the best ways of leaving below one’s means is buying generic names over name brands that cost a fortune (or used), reducing energy costs, and using cash-back apps and coupons.
The 50/50 rule should apply when looking to live below one’s means. As income increases through bonuses, tax refunds, and gifts, only less than half of the additional income. The remaining funds should be used to grow the nest egg; for instance, if you get a $1,000 bonus, spend less than $500 and invest or save the remaining amount.
11. Ask the Experts
While making financial decisions can be complex and cumbersome, financial advisers can lessen the burden by sharing solid ideas on how to budget, invest, and create additional sources of income.
Financial experts help people understand where they are financially and put a plan that can accelerate the path to financial success and goals in less than ten years.
12. Strive for a High Credit Score
A good credit score can make you financially free. It lets you borrow money cheaply and easily. Experian says a score above 700 is good for finding the best deals. A score above 800 is great for financial freedom, as it lowers your interest and fees.
While financial independence is a lofty goal for the majority, anyone can make it happen with careful planning, discipline, and wise financial decisions. The journey requires commitment, discipline, and perseverance.
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JayDee Vykoukal is a writer, author, mom, and Doctor of Physical Therapy. She has been writing about everything motherhood and health-related since 2018 when her first daughter was born, and she wanted to stay home. She loves to research new topics and fun facts with her kids to teach them about the world.