What We Can Learn From The Financial Independence Movement
Financial independence is a term that has many a different meaning. Is it complete freedom from debt, or when you are simply self-sufficient? Some see it as the ability to make decisions based on what makes you happy and not what makes you money. Yet others see is as that moment when you do not have to work another day in your life. All different and all correct. Never one-size fits all. Nothing ever really is.
For most retirement, by default becomes financial independence; when social security and the pension plan kick in, but do you want to work 40 plus years so you can one day finally say “I am done”? Why wait until then to do all the things you always wanted to, but never could do? This should not be your life’s goal. Imagine learning to skydive at 67. Pretty neat, but would you rather take that leap on your 40th birthday instead? For a growing number, financial independence has become the ultimate goal.
Do you want to spend more time with your loved ones, travel more? Just aiming for early retirement to enjoy life The goal is achievable. Truth be told no one should have to live paycheck to paycheck.
Keep an open mind and be flexible!
Some changes need to take place and at times it may not seem easy, but seeing the financial improvements over time will make it all worthwhile. Here are a few you can start with today...
- Save regardless of your income level
No matter how small what you can save may seem, it is not. So get started now because compounding interest starts working for you as soon as you start working towards your goals. Do not wait until you get that raise because you will find an excuse to delay or spend it and never get started. Make saving automatic if you have to because you must pay yourself first. Start now and watch your money grow over time. Many may be thinking that with retirement 30 or even 40 years away, why start now?
- The magic of compounding
Historically the S&P has earned approximately 8% a year. I will use that for this example. Say you start saving $1,000 a year and do so for only five years ($5,000) at age 21; in 30 years you will have more than $40,000. Starting ten years later, at 31, would leave you with only $18,000.
- Learn the difference between wants and needs
A need is something you can't live without. We all need to eat, but it does not have to be steak and lobster every day. A want is something you would like to have, but It is not a necessity. You do not need 43 pairs of shoes along with the matching purses, belts or other accessories. Shop in moderation.
- Live bellow your means
Spend less than you earn by living bellow your means, not within your means. There is a difference and while this should be obvious, for many, it isn’t. That shiny new luxury car may impress the neighbors, but it will definitely depress your savings. You cannot buy a new car every three or four years, it is fiscally irresponsible and downright absurd.
- Reign-in your spending
Step away from consumerism. That behavior destroys your financial health. What you bought yesterday is now garbage. Today you borrow from tomorrow to buy something new; you'll have to repay with interest. And the cycle continues. How it is good that you spend money, sometimes money you don't have, on things that you don't need? Instant gratification is your enemy.
- Increase your income
Find a side hustle. Get a raise, or a new job. I am not advocating that you just quit, but since you are working you can afford to be selective when looking for better options. In a 2014 article Forbes reported that employees who stay in companies longer than two years make up to 50 percent less over their lifetime.
What steps did you take, are there any you plan to take on your path to freedom?
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