Achieving financial freedom is a goal for many people. It generally means having enough savings, investments, and cash on hand to afford the lifestyle you want for yourself and your family—and a growing nest egg that will allow you to retire or pursue the career you want without being driven by earning a certain amount each year.
Unfortunately too many people fail to achieve it. They are burdened with increasing debt, financial emergencies, profligate spending, and other issues that thwart them from reaching their goals. Then there are unexpected events, such as a hurricane or earthquake—or a pandemic—that overturn plans and reveal holes in their safety nets that weren’t visible before.
Trouble happens to nearly everyone, but these habits can help you get on the right path towards financial independence:
Visualize first, then plan. You can start by considering what your vision of financial independence actually looks like – and then get a reality check. Qualified financial experts can help you examine your current financial circumstances, listen to what financial independence means to you and help you craft a plan. The path to financial independence may be considerably different at age 20 than it is at age 50 because the more time you have to save and invest generally produces a better outcome, but at any age, start with a realistic picture of your options.
Budgeting is the process of tracking income, subtracting expenses and deciding how to divert the difference to your goals each month. It is the essential first task of personal finance. If you haven’t learned to budget, you may need to do so.
- Spend less than you earn
It might be obvious, but spending less than you earn is one of the most difficult financial behaviors to execute. Adhering to a lower standard of living and expenses will help you put more money into savings and investments sooner than you think.
- Buy assets that generate income
Stocks, real estate, collectibles or cash investments all have up and down markets but do your homework and focus on investments bought at attractive prices and are likely to appreciate over time. Also, don’t forget to study the tax ramifications of any investment transaction you make.
- Always know where you are financially
Financial planning isn’t about making one set of financial decisions and assuming you’re set. Lives and situations change and your financial planning must be flexible enough to withstand both positive and negative changes without derailing your hopes for financial independence. If your forte is not investment, financial planning or tax matters, you can bring in qualified experts to help.
However, note that financial independence involves diligence, consistency and a bit of sacrifice. Also bear in mind that even the smallest moves can yield big outcomes.
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