Financial independence is the status of having enough income to pay your living expenses for the rest of your life, without having to be employed or dependent on others.
Everyone desires to be financially independent because when you are financially independent you are capable of taking your own decisions without having to be dependent on anybody.
It increases your self-respect and makes you more confident to face any kind of life situation. You need to be financially independent because it will ensure that you are in a better position to cater to your needs and you don’t find yourself at the mercy of people.
Unfortunately, too many people don’t achieve financial independence due to so many factors. Some are faced with increasing debt, financial emergencies, etc that thwart them from achieving financial freedom.
Below are properly researched steps that will guide you on the right path to attain financial independence
1.) Set Financial Goals
To achieve financial freedom, you need to write down specific financial goals you want to achieve. You need to write down how much you desire to earn, how much you want to have in your bank account, what the lifestyle entails, and at what age this should be achieved.
The more specific your goals are, the higher the likelihood of achieving them. Setting financial goals (Long-term, Mid- Term, and Short-Term) will help shape your decision-making when it comes to your finance and it will help dictate how much savings, investments, contracts, etc you need to realize your goals.
You will begin to align your actions with your values which will expand your chances of success and also help to build your accountability.
2.) Live Below Your Means
What does living below your means mean? It is when you spend less than what you earn. By applying this method, you can achieve financial independence. You need to reduce spending that doesn’t align with your priorities.
By doing this, you avoid being in debt which enables you to save more money for unexpected expenses or events. Research suggests that you live on at least 15% less than the amount you earn. Living below your means will ensure that you spend less which enables you to have money set aside in other to invest and make more money.
It provides you with financial security, because as your expenses lower, your money grows, which eventually transforms into a big pile of cash to cater to other needs. People who live far below their means, enjoy a freedom that people busy upgrading their lifestyle can’t fathom – Naval Ravikant.
3.) Proper Maintenance
This has to do with taking good care of your properties, such as cars, clothes, TV sets, shoes, etc, to make them last longer.
Properly maintaining your property will save you the cost of repairing and replacement. Preventive maintenance is a good investment by all means.
As a subsequent rule, for every dollar spent on preventive maintenance, you will save at least five dollars in subsequent expenses – Kansas State University.
4.) Create Multiple Streams Of Income
If you must attain financial independence, this step is very compulsory. Having multiple streams of income allows you to have various cash flow sources. Even if one of your sources of income fails, the rest can still put you in a better position. It also provides you with financial security.
In a situation where you have a job that demands your presence, the way to go about this is to choose things that will generate an income passively. In today’s uncertain economy, the safest solution to be wealthy, be in total control and enjoy freedom for you and your family is to have multiple streams of income – Robert G. Allen
One beautiful thing about creating multiple streams of income is that there is no limit to how much money you can make. According to research, most millionaires have up to seven streams of income. The more streams of income you have, the easier it is to attain financial independence.
5.) Cultivate The Habit Of Savings
I have often heard people say they earn so little which makes it impossible for them to save. Truth is, no matter the little you earn, it is a very wise thing to save a little amount from it.
Perhaps, you don’t have enough room in your income to save money now, then the solution is to lower your expenses so you can have something left to save.
Never let excuses stand in your way of saving money. It is a long-term goal that should never stop as long as you keep earning. Accumulated savings gives you peace of mind because you feel at peace with the awareness that if an emergency should occur, you won’t be caught off guard.
Saving a small portion of your income over the years can Accumulate into a substantial amount of retirement funds.
6.) Pay Off Your Debt
Debt is a serious threat to your financial security because it keeps you from making the most use of your money. Paying off your debt will give you more room in your income to ensure that you become financially secure. Although, debt is not intrinsically bad, always borrow what you can payback.
When you have a debt hanging, it can lead to stress because you tend to worry about how you are going to pay it. Always ensure to pay off your debt because it will relieve you from anxiety because when you are debt-free you won’t have to worry about anything. Freedom from debt is worth more than any amount you earn.