There are many definitions of financial independence, since not all of us want to own a private jet or a mansion in the hills.
However, living comfortably off of your savings and investments and having no debt to worry about may well be easier to accomplish that you think!
Visualise First, Then Start Planning
Everyone’s vision of what financial independence is could probably stand a little bit of a reality check.
Start by actually examining your definition of this phrase, and then get to gathering some qualified financial advice to either set or reset the course you’ll take. Checking AFL betting odds in the hopes of a life-changing win doesn’t count!
Budget, Budget, Budget
Tracking your finances in order to achieve the results you want starts with budgeting.
This can be defined as measuring your income, subtracting your expenses, and deciding how to divert the difference towards your goals.
This is a non-negotiable in terms of achieving monetary autonomy.
Spend Less Than You’re Earning
This is one of the best-known rules, but remains one of the most difficult to execute.
A good rule of thumb is to put 10% to 15% of your gross income or investments away at least monthly.
Build Better Safety Nets
Insurance and Emergency Funds are a core part of proper financial planning, but are rarely discussed together.
It may, however, make sense to take a look at your current excess on car, health, and home insurance to see if those amounts should be built in to your Emergency Fund instead.
Many of us keep these quite high in order to keep premiums lowered, and it makes sense to think about whether you would have cash on hand to cover excesses if you had to make a sudden claim.
Eliminate Your Debt
Getting rid of any revolving, non-housing debt is the single most effective thing you can do to free up cash to save and invest.
You need to become a student of commissions and investment fees. When you are able to add any money to your investments or savings, be aware of deadlines, fees, and penalty rules.
Purchase Assets That Generate Income
There’s no such thing as a foolproof investment. Whether you’ve put money into cash investments, collectibles, real estate, or stocks, all of the markets will rise and fall.
What you can do, however, is make sure that you fully understand everything you’re putting money in to, and focus on acquiring assets that will see you making money over the long-term.
Always Know Where You Stand
Financial planning is not about making a single set of decisions and never revisiting the subject again. Your life and/or situation may change, and your financial plan needs to be flexible enough to withstand these changes, whether they’re negative or positive, without derailing your hopes for becoming financially free.
Being able to afford a lifestyle you enjoy without constantly worrying about money is an enormous reward and relief. If you don’t feel that you’re heading in that direction, consider putting at least one of these steps into motion right now.