Simply put, financial independence is defined as having enough wealth to sustain your lifestyle for the foreseeable future. You can achieve financial independence by having enough saved up to last you a lifetime or by having sufficient passive income streams to support you.
In this post, we’ve highlighted the four things you needed to achieve financial independence.
- Start saving now
When it comes to saving, most of us would likely agree that it’s much easier said than done. From paying off credit card bills to nights out with friends, it seems impossible to have any money saved up.
However, the fact of the matter is, saving is an essential part on the road to financial independence. Oftentimes, many of us are guilty of procrastination when it comes to savings. We put it off to the next paycheck or the next bonus only for the cycle to repeat itself once again.
One of the easiest ways to get started is by setting up a forced savings scheme. In a nutshell, forced savings schemes work by deducting a set amount of your paycheck every month. The funds are then deposited into a bank account.
Money from a forced savings scheme typically will not be able to be withdrawn for a set amount of time. Hence, this eliminates the temptation for you to spend any of your savings. Over time, you’ll be able to build up a substantial amount of money in your account.
Banks and insurance companies usually have a variety of forced savings schemes. For example, some insurance companies offer health insurance that doubles as a savings scheme. This allows you to save on insurance while still putting some aside for the future.
- Make your money work for you
Having successfully put aside a sum of money, it’s now time to make your money work for itself. As the old saying goes; money makes money. For starters, you could easily deposit your cash into a fixed deposit which pays returns in an interest payment on your deposit.
Unfortunately, most fixed deposits do not offer particularly attractive interest rates. However, fixed deposits are low risk investment and have little-to-no risk exposure. If you’re looking for something with better returns, you can always consider investing in treasury bills or governments.
The returns from these investments allow you to generate a steady stream of passive income to supplement your finances. Being low-risk investments, you can rest assured that your money is safe, but you’ll enjoy only minimal returns.
If you’ve got an appetite for risk, you can always consider investing in volatile assets. For example, junk bonds are bonds issued by companies or countries with a lower credit rating.
This allows you to enjoy much higher rates of return at a significantly higher risk of default.
Other more volatile assets such as cryptocurrencies or shares in startups can also be considered. You’ll need to exercise caution when investing in such assets as you can quickly find yourself making a loss.
If you are into sports, you can also try to invest in online gambling. Baseball betting online is one way, but also soccer, horse racing and NFL. Just make sure you have enough knowledge on the subject you choose, and you do not risk too much – to keep your expenses under control.
- Keep your expenses under control
Okay, this may be a contentious point for many. But it needs to be said. So here goes; most of the time, we spend money on things that we don’t need. From expensive coffees to overpriced lunches, our cash is simply being wasted. The reason behind all of this? Convenience.
You’re rushing to work, and you need a cup of coffee. Simple, just go to Starbucks or that cafe around the corner.
Heading out for lunch but didn’t have time to pack a meal. No worries, you can always grab a meal outside.
While paying $5 for a cup of coffee and $15 for lunch may seem trivial, on the long run these costs add up. Consequently, our cash is being channeled for purposes that do not contribute to our financial independence. Instead, we’re paying for the price of convenience.
So, before you head out for work, why not brew your own cup of coffee or pack your own lunch. On the long-term, you’ll be healthier, happier and richer.
- Get a side gig
In today’s economy, it’s nearly impossible to get by on a single source of income. Besides that, you could fall sick or be laid off tomorrow. How would you earn a living then?
With the internet of course. From seamless communications to the rise of the gig-based economy, the internet has connected us all in more ways than one. The gig-based economy refers to a collection of freelancers who work with a variety of clients on a contractual basis.
Freelancers are contracted for a variety of jobs. These tasks range from copywriting and graphics design to programming and even financial management. If you’ve got a skill, you should consider freelance work. As most freelancers work remotely and have flexible hours, you’ll be able to start your own business on the side and develop another income stream.
In fact, many freelancers have opted to go full-time, turning their side-gig into an actual, profitable business.
While being financially free may sound like a pipe dream to many, the fact is; with some creativity and a lot of grit, financial independence is quite possible.
Author: Benjamin Lee