Achieving financial independence is like the holy grail of financial goals. After all, the opportunity to no longer work for money in order to live is incredible tempting.
Just imagine that you could do with this newfound freedom!
But the way to Financial independence (or abbreviated FI) usually not glamorous. To do stable progress towards your ultimate FI goal. But there are several strategies to help you achieve financial independence.
Let’s take a look at these expert tips from people who have actually achieved FI or are seriously committed to achieving it. You can find advice to help you change your financial trajectory.
1. Determine your “FI number”.
Financial independence comes when you have saved and invested enough money to never need work another day in your life. While you may decide to work your favorite job, there is a lot of freedom in knowing that you will never have work another day in your life.
A big part of the road to financial independence is determining how much money you really need to make that dream a reality. This number is your FI number, the goal you should aim for when you decide to get serious about FI.
While there are several different schools on how to calculate the FI number, this general rule of thumb is a great place to start:
Your annual expenses x 25 = your FI number
Personally, I am at the beginning of my journey towards FIRE (financial independence / early termination). I am only a small part of the road to achieving the desired FI number.
But what I had in mind helped to keep me motivated to save. additional diligently. I also highly recommend that you provide your FI number. You may be surprised at how much a specific goal makes you focus on the savings goal – at least it has helped me so far!
2. Pay off debts that hinder you.
Equity is a big part of achieving financial independence. When you check your net worth, your debts reduce that number.
With this in mind David Aleer, recommends paying off debts as soon as possible. As a lawyer in the later stages of his financial independence, he says:
“AAfter almost a decade after graduation from high school, paying off student debt was painful, but I stayed on the course and paid as aggressively as I could to get rid of my debt as quickly as possible. ”
Ahler says the key to success in paying off the debt was putting together a written repayment plan. Plus, he regularly checked his dwindling loan balances to keep him motivated along the way. It expands
“If you’re struggling to make the progress you want, it’s time to look for side-measures to increase your income-earning potential and write off debt even faster.”
3. Avoid lifestyle inflation.
Lifestyle inflation is easy to justify. After all, shouldn’t you take advantage of the best your paycheck can buy as it rises? If you are trying to achieve financial independence, it is critical to move away from lifestyle-related inflation.
James Deal, CEO Textel, reached FI several years ago. Diehl says:
“If I refused to keep up with the Jones family, it helped me stay on a moderate budget, which included saving 30% of my monthly income for retirement and avoiding unnecessary big purchases that get in the way of my savings. ”
He recommends putting this into practice:
“Smart cash early in your career and keeping your budget low without seriously depriving yourself of what you want helps you maximize your return on investment so you can save less now and still get enough of your egg.”
4. Focus on savings
Easier said than done. This is especially true when life negates costs.
But you can increase your savings by making them a priority. Or, in other words, bet on paying yourself first.
Mineesh Patel, CEO Firm Patelis so close to FI that it hopes to achieve that big goal within a year. But when he was just starting his career in FI, he said:
“The most important way to save money for financial freedom, even as a young graduate on a tight budget, was to pay yourself first. “
Paying yourself first is a great idea. But what does it actually look like in practice? Patel’s journey began when he automatically invested a portion of his earnings monthly into retirement savings. In doing so, he knew that savings would not be jeopardized. Patel says:
“Somehow, being aggressive about savings and having less money in your checking account for a month makes you feel like you don’t have the money to spend frivolously.”
5. Spend on what matters to you.
Kara Metcalfe and her husband reached FI when they were in their thirties and quit their corporate job to Residential building full time… One of her tips is to spend with purpose.
“Every dollar spent is a dollar that you will never get back. ”
She encourages those on the road to FI to see every purchase as a choice. exchange time – FI in the future so you can get this item now. She says:
“This perspective has helped me lead a minimalist lifestyle and has significantly lowered my consumer outlook. I really didn’t need another pair of jeans when everyone else in my closet was fine. “
Before making a purchase, make sure the item is worth it. You will have to decide for yourself what is “worth it.” But taking the time to think about your purchases can lead to cost savings.
6. Increase your income
The savings you create should come from the difference between your spending and your investment. Unfortunately, thrift will only help you…
At some point, you may need to look at the other side of the equation and increase your income in order to increase your savings.
Sam Zelinka, creator FI civil servant, 86% of the way to your goal FI. For his family, increasing income was an important part of achieving financial independence.
“First and foremost, we increased our income through promotions in our traditional job. At the same time, we both have small side effects that we used to pay off our mortgage faster. “
7. Take care of yourself along the way
It is easy to let your determination to achieve FI push you beyond your capabilities. But too much effort can lead to premature burnout.
Avner Brodsky achieved financial independence through entrepreneurship. He recommends taking the time to understand your limits and learn to play within those limits. Brodsky says:
“Understanding your limitations and accepting your weakness will only benefit you in your knowledge. Taking care of your mental health is extremely important when working towards FI, because if you struggle, your work will be difficult. “
Do whatever you need to do to take care of yourself along the way. Remember that slowing down is normal. Don’t force yourself to go beyond a healthy lifestyle.
8. Invest in the future
Adam Garcia, founder Stoke Dork, is on the way to financial independence. His advice is to think smart investment strategy it goes beyond saving. Garcia says:
“The idea of financial independence can easily turn upside down if you follow it blindly. For most people, the most intuitive way to get started is to save and save as much as they can – some even manage to save half of their earnings every month! “
But simple savings won’t burn out your path to financial independence. Garcia expands:
“If you want an effective FI strategy, you need to complement your savings with investments. In other words, for every penny you save, it’s good to invest another penny so that it eventually turns into two pennies. “
Garcia calls this concept as follows:
“Have your cake and take a bite of it too. This is only possible and viable if the pie grows at such a rate that it will never disappear from a bite. “
9. Do not try to run to the finish line.
Financial independence is large monetary goal. In most cases, this will take years (maybe even decades).
Anthony from Investor’s Guide wants to remind us that:
“personal finance is not a sprint, it is a marathon. ”
When you’re just starting out, the difference may not be noticeable. But over time, you will see real progress.
As you approach the path to financial independence, Anthony recommends thinking of travel as training.
“One abs workout won’t give you a flat stomach, but hold on for ten years and you’ll definitely be rocking those six cubes.”
Imagine where you might be in ten years from now deciding to make progress towards your financial reporting goals with every paycheck. A commitment to FI can change your life over time with little effort.
10. Focus on your own journey.
At all stages of our life, it is easy to get carried away by comparisons. It’s the same with personal finances.
Kara Metcalfe (link waiting) recommends focusing on your own journey. She says:
“If you compare your life to friends, family or coworkers, you usually feel left out or needy because you will be saving money and not going on an extravagant vacation, buying a new wardrobe every season, or dining out every day.”
As for Kara, she also says that:
“When I was 20, I hated eating my packed lunch every day when my colleagues were going to lunch. But in my 40s, these friends still get up before sunrise every day to get to a full-time job, often soul-sucking. I wake up naturally (no alarm) and spend my days exploring new beautiful places every day. “
Remember, everyone has different paths. Make it a priority to focus on your goals and stop comparing your life to others.
Summary
The road to financial independence will look different for everyone. As you travel, adapt your spending patterns to find a balance between your current needs and your future desires.
What steps are you taking to achieve financial independence? Let us know in the comments!
