10 Top Tips To Become Financially Independent
Cryptotrader.plus Staff – (28.12.2017)
Becoming financially independent is a choice. People can choose how they want to achieve financial independence in their own way. Some of us want to own a mansion, while others want to put cash by for use in emergencies or to arrange their dream holiday. Although achieving financial independence and being able to live comfortably with the help of savings and investments debt free may sound challenging, it could in fact be easier than you think! Read our 10 top tips to become financially independent below:
- Identify your vision of financial independence, then plan.
Before you go ahead and start planning how to become financially independent, you need to take a step back to think. Begin by considering what you hope to achieve in a set period of time and what your vision actually looks like before you seek further qualified financial advice to agree or restart your course of action. Although the path to gaining financial independence may differ depending on your age, no matter what, the more time you put in to invest typically produces a better outcome. It doesn’t matter if you’re age 20 or age 50, you should start your journey by getting a realistic picture of the options available to you.
Your vision of financial independence should inspire you. You should be proud of what you’ve already achieved whilst continuing to work towards other aspects of your vision. You may be surprised at how writing your intentions down can significantly improve your progress.
There’s no other way around it: to track your finances you need to budget. No matter what, always vow to save money whatever your situation may be. People who say “I’ll start saving money when…” end up saving nothing at all because the “when…” never comes. Think now. When is always. You should aim to save an equal amount each month no matter whether you have a big event next week or are going out on the weekend. Budgeting effectively involves the ability to measure income before subtracting mandatory expenses (e.g. bills, car insurance…) before identifying how to transfer the difference to your goals – otherwise it’s almost impossible to achieve financial independence!
- Avoid spending more than you earn
Although it makes sense, you really should avoid spending more than you earn. Despite being one of the most challenging actions to execute, it is possible. Why not put up to 15% of your gross income into savings or investments each week? Some working couples even try to put aside a substantial amount of one salary if they are financially stable enough to do so. No matter what, anyone who learns to adapt to a lower standard of living can put more money into savings sooner than those that refuse to minimize their standards.
- Smart safety nets
The future is inevitable. Both emergency funds and insurance are a major part of a financial independent plan. You should set up an emergency fund in a separate account for cash that can be substituted for credit in an unexpected emergency, such as if your car broke down on the road and it needed to be repaired or if your boiler stopped working. It’s also a good idea to take into account contemporary deductibles on health, home and car insurance to find out if those fees should be incorporated into your emergency fund.
Top tip: A lot of people choose to keep their deductibles fairly high in an attempt to keep premiums low.
- Remove debt
In February 2014, the Federal Reserve Bank of New York reported that auto and credit card debt, including home and student loan began to increase again. One of the most effective actions to take when striving to become financially independent is to abolish non-housing debt so you can continue to save and invest as planned. So yes – pay off debts with savings first. The best way to pay off your debt is to organize a Debt Management Plan (DMP) to allow you to pay back your debts at a rate you can afford in one monthly payment. In the scenario that you have no available savings, assets or income your debt may be written off but for this to be done, you must be able to prove to your creditors that your circumstances are improbable.
- Consider your occupation
In order to become financially independent, you don’t necessarily have to quit your career. It is only when you are left without steady income that can be used to fuel savings and investments to build over a period of time will you need to reconsider your career. If you are already behind your financial goals, it is likely that you won’t be able to quit until you’re comfortable enough to do so. In this case, you might decide that consulting part time could be the perfect solution for you to maintain financial stability whilst you hunt for a higher-paying job suitable for your needs.
We can’t stress enough that no matter your age, to become financially independent you need to conduct a personal analysis of what money, property and belongings you require to live securely, yet happily. To reach your goal faster you need to decide the appropriate places to cut your living expenses. Some decide to sell their home and move into a smaller property or to an area with less expensive living costs and fees, whereas others decide to sell or donate a property they no longer need and use the money gained to abolish debt or add to savings to lift a weight off their shoulders.
- Be sparing
Before you start adding money to savings and investments ensure you understand what fees, penalty rules and deadlines may be involved in doing so. Make sure you conduct a full evaluation of what fees you pay on each investment account you have to monitor your outgoings effectively.
- To invest, or not to?
All markets have ups and downs, which is why it’s vital to understand that no investment is completely fool proof. No matter whether you decide to invest in collectibles, stock or real estate, the future of the market isn’t guaranteed. Before you invest, it’s important you focus on assets that will generate money than those that are great for a quick amount of extra cash. Think long-term!
- Know where you stand financially
Last but by no means least, you should always be aware of where you are financially. Unfortunately, financial planning isn’t limited to making a number of decisions. Although you may assume you’re set to go, situations change constantly. Your financial plan must be flexible enough in order to withstand unexpected and positive changes in order to maintain your progress towards achieving financial independence.