What It Means to Be Financially Independent
Are you finding it hard to become financially independent? If so, don’t get down on yourself. You are not alone in the slightest bit. Many Americans struggle to balance their books properly, no matter how much money they make.
To be clear, financial independence should not be your end goal. It should be a path to financial freedom and building wealth. You can master each by being vigilant with your finances.
Financially Independent Definition
Everyone wants to make decisions based on happiness, not how much money they have. But this isn’t possible until you build enough wealth and have passive income. You’ll need to have enough savings and income to pay off your living expenses for the rest of your life, and then some.
So what does it mean to be financially independent? It’s the status of not having to rely on others to meet your financial needs. You are completely self-sustainable at this point.
If becoming wealthy is the destination, financial independence is the bridge you have to cross. Moreover, you have to become independent before you can begin building wealth.
How to Reach Beyond Financial Independence
The journey is just beginning once you reach financial independence. In fact, most Americans will get there in their early 20s or 30s.
That doesn’t mean you can begin to aimlessly spend your money. It means you no longer rely on your parents, or other figures in your life, to take care of you financially.
At this point, you have a reliable job, pay your own bills and live on your own. Yet many people will take on large amounts of debt at this stage in life. Don’t fall victim to this path once you become financially independent.
Here is how you can begin to make real strides toward financial freedom and building wealth…
Begin by automating your savings efforts through your income. Set up an automatic transfer with your banking service that places a specific percentage of your monthly income into a savings account.
In general, it’s best practice to begin by placing 20% of your paycheck into savings each month. The more you make, the more you can save.
Saving money is a start, but you also have to create a budget for everything else. Budgeting ensures you don’t spend more money than you have. In addition, it eliminates the possibility of taking on debt through credit cards or personal loans.
Live within your means and, over time, you will begin to see your savings add up. And, as you add more assets such as buying a home, your net worth will rise as well.
As you can see, becoming financially independent is only the beginning. Now you can focus on passive income. The best way to bring in passive income is through the stock market.
Investing in stocks is the quickest way to build wealth. Just look at some of the wealthiest people in the world. Warren Buffett’s investment portfolio has made him one of the wealthiest people on the planet.
This is how you create your own path to financial freedom. At this stage, building up your wealth is only a matter of time.
Make a plan that is sustainable, and continue to adjust that plan as your income increases. Continue to make smart investments and watch the compound interest pile up each year.
Investing and Building Wealth
Are you ready to take your financial independence to the next level? Learn how to invest in stocks with our help at Investment U.
Our team of experts has decades of experience with Wall Street as some of the top traders in the country. Sign up for the Investment U e-letter below for immediate access to daily stock market insights and trends.
Your future will depend heavily on your ability to save your money and invest it properly. Once you are financially independent, it’s your responsibility to create your own path.