Financial independence might mean different things to different people, but many people are considered to be financially free when they can live comfortably from their savings and investments without debts. It is easy to become financially independent and not as hard as many people believe. The first step to becoming financially free is to have a plan, self-discipline and informed financial guidance. Here are proven ways of attaining financial freedom.
First, you need to visualize the kind of life you want to lead and have a plan to attain the same. Your vision of financial independence must be subject to a reality check. Begin by first making an informed consideration about how your vision looks like and get credible financial advice to help you in your course. Becoming financially independent might sound different for people in their twenties and those in their fifties. You are likely to have a better outcome when you have more time to save and invest. Irrespective of your age, it is vital that you start being realistic about the options available to you.
The next step to becoming financially independent is to budget properly. Track your finances well through honest measurement of income, subtraction of expenses and decide ways of diverting the difference towards your life goals. This is a critical step in attaining financial independence. You need to work on expenditure and ensure that what you spend is less than what you earn. This is one of the hardest financial habits to nurture and execute. As a general rule of thumb, it is advisable to allocate anything between 10-15 percent of your gross income into savings and investments. When you adhere to a lower standard of living, it becomes easier to put more money into savings and investments within a shorter period of time.
The other proven way of becoming financially free is to build smart safety nets. Ensure that you have emergency funds and valid insurance policies. When you become effective in dealing with financial emergencies, your savings and investments will grow at a faster rate. You also should work on eliminating debt. Come up with a plan of getting rid of non-housing revolving debt, and you will have more funds available for saving and investing.
Take time to evaluate your career. The journey towards financial independence should not necessarily demand that you quit your career, but you need a steady income that is sufficient enough to fuel savings and investments which can build over time. If you are in employment, consider expanding your work-related income and consult credible financial and tax experts to help you in evaluating your current income from your career and puts everything in its context.
Consider downsizing. Irrespective of your age, if you want to be financially independent, you need to have an honest evaluation of the money and property you need to lead a happy and secure life. If you can cut down on your overall living expenses, you will get to your financial goals faster. You might want to consider moving to a smaller home or an area with lower costs of living.