What is financial independence?
True financial independence is the status of having enough money to pay for your living expenses without being employed or being dependant on others.
But is this possible? The answer is most definitely yes! But unless you win the lottery or gain a large inheritance, this needs to be carefully planned. Then the plan must be executed.
A financial plan is essential for everyone. However, achieving financial independence comes with attaining the financial goals you set in your plan. Here are some steps to take to gain financial independence.
Gaining control of your finances
Even if you are the type of person who loves living in the present rather than planning for the future, you need to look at the bigger picture.
Start by getting pension advice and gaining some real expert knowledge on savings and investments. This will take you further towards your goal and understand what steps you need to take to ensure financial freedom in the future.
Face the fact that by living to your means, stacking debt on your credit cards, and never investing or saving, you will never reach financial independence. Stop living for gratification now and decide to take hold and gain control of your money. You have the power to do this. Excuses never got anyone anywhere. Building wealth takes time, and you have to put in the effort.
– Pay off debts first
– Live within your means
– Set up savings, pensions, investments, and work on potential additional income streams
What are your life goals?
To achieve financial independence, it is essential to plan and evaluate what your life goals are. Start by answering these questions:
– What are your passions?
– What five things make you the happiest
– What is important to you
– What would you like to achieve in your future?
– Create a timeline
Frame your day
If you had financial independence, what would your day look like?
– What time would you get up?
-What activities would you do?
-Which location would you live in?
-What type of house?
-What car would you drive?
Stop and think and daydream about your ideal life!
The answers to these questions should start to form ideas in your mind about what to achieve. You can then create a plan of what your future may look like
Create your plan
To start achieving the financial independence you desire, you must:
- Create a budget
- Ensure you have an emergency fund
- Continuously up your saving rate where possible, e.g., if you receive a promotion, make sure your saving amount each month increases to reflect the difference.
- Start investing your money and get advice on pensions and savings.
- Look at more income streams.
Potential Additional Income streams
To achieve financial Independence you may have to investigate additional income streams. Here are a few ideas
- Property- rental income or property development
- Business ownership or shares in a business
- Royalties – are you an author, artist or songwriter!
- Dividends from stocks, bonds and trusts
- Pensions
Create a vision board
Visualisation is one of the most powerful exercises for the mind. Create a board of images reflecting how you want to feel and the life you want to live. Do not create it full of pictures you want but photos of the life you want to make. Your board can also have items such as seashells, feathers and anything that you feel drives and motivates you. Place your board somewhere prominent. You might want to design more than one board and place them in various parts of your house.
Have you read ‘The Secret’ by Rhonda Byrne? In this book Rhonda shares her own journey of discovery. Find out more here
“Have a vision. It is the ability to see the invisible. If you can see the invisible, you can achieve the impossible.”– Shiv Khera.
The difference between financial independence and financial freedom
Financial independence means you no longer need to work to maintain your lifestyle. You have sufficient income (from pensions, investments and passive income) to live everyday life.
Financial freedom is another level. This means you can choose to fly first class, drive more than one car, have more than one house and means you have enough income to spend as you please. Few people ever reach this, but for the determined, it is possible!
Start designing your life
Look into your future and start to design your life. What will your life be like in 20 years? It sounds complex, but it isn’t once you have done the exercises in this blog.
Once you have your life plan, you can then take steps to start the journey. Take advice from a regulated financial advisor, and use that advice to reach the goals you set.
Your financial independence is in your hands. The life you lead now determines the future. We all lead busy lives, and many people do not consider the future. However, the future will soon become the present as we all know that time does fly very fast!
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