WHAT DOES IT MEAN TO BE FINANCIALLY INDEPENDENT?
People often debate what it really means to be financially independent. Some think it means being so rich that you never have to work again. Personally, I don’t believe that. For me, financial independence means having enough money so my investments generate enough income to live comfortably. At first, I couldn’t imagine retiring before 65 or living a great life without working. It seemed impossible!
However, I realized that it’s possible if you don’t get caught in the traditional education system’s way of thinking. Like many millennials, I was taught that the only way to live was to go to college, get a degree, and work a 9 to 5 job until retirement.
I hated my accounting job. Every night, I dreaded waking up the next morning, and every morning, my legs would tremble before I left the house. It got so bad that I decided to quit my job and drop out of school.
Fast forward a few years, and now I manage a team in the grocery industry and run a finance blog on the side. And guess what? I love every minute of it. I’m living a life full of purpose and continually striving to achieve more. My ultimate financial goal is to achieve financial independence. Here’s how you can work towards it too:
1. FIND YOUR PASSION AND DO WHAT MAKES YOU HAPPY
Unless you’re born into wealth, achieving financial independence will require work. Find a job you’re passionate about, something that motivates you. If you’re going to spend 40 hours a week working, you might as well enjoy it. Passion brings natural motivation and drive, pushing you to strive for improvements and achievements daily.
Why is this the first step to financial independence? Because it’s a long journey, and doing a job you hate will make it feel even longer and more painful. During the month I worked as an accountant, it felt like an eternity. I eventually returned to my old job as a grocery clerk. Although the pay was much less, I preferred it over a high-paying job I hated. My dedication and passion led to promotions, proving that loving what you do can pay off.
2. CALCULATE HOW MUCH YOU NEED TO REACH FINANCIAL INDEPENDENCE
The next step is determining how much money you need to be financially independent. It’s important to set a financial target before starting your journey. To figure this out, you need two numbers:
– Your annual expenses (how much your lifestyle costs each year)
– Multiply that by 25
This calculation gives you the amount you’ll need to save to have a “safe withdrawal rate” of 4% annually.
3. LIVE BELOW YOUR MEANS WHILE EARNING MORE
When I was younger, I wanted a Rolex and a fancy car. Did I need them? No, I just wanted them. Who doesn’t want nice things? But once I started earning my own money, I realized materialistic items don’t matter. Sure, a Rolex is nice, but that money could be better spent on traveling, learning, or investing.
There are two main ways to build your funds for financial independence:
– Increase your income
– Decrease your expenses
A third way is combining both: earning more while spending less! Achieving financial independence requires effort and hustle. Work multiple jobs, start a business, or have a side hustle. Remember, the more lavish the lifestyle you want, the more money you’ll need. Someone living frugally will need less to achieve financial independence compared to someone who wants a luxurious lifestyle.
4. LEARN HOW TO INVEST
One crucial subject I never learned in school was how to invest money. It seemed like school only taught me about paying money for tuition, textbooks, transit passes, etc., but not about saving, earning, and investing money.
Investing is key to financial independence because there are only so many hours in a day. If your income is not tied to your hours worked, that’s great, but most of us get paid by the hour. With only 24 hours in a day and needing around 8 hours of sleep, there’s a limit to how much you can work without harming your health. Once you’ve earned your money, it’s time to make your money work for you through investing.
CONCLUSION
That’s my four-step journey towards financial independence! Share your thoughts in the comment section below!