Achieving Financial Independence: 3 Most Important Steps
Achieving Financial Independence Tips Updated: June 14, 2020
What Is Financial Independence?
Many people confuse it with having a lot of money. It’s not necessarily the same thing. Financial freedom means that you have enough income to last the rest of your life without needing to work. Anyone can become financially independent provided they understand what it will take, and the discipline and patience to get there. People have gained financial independence with an average salary and a smaller nest egg than you would expect. They’re ordinary people with normal jobs just like yours.
The only real difference is that they were committed to following three key steps.
3 Steps to Achieving Financial Independence
Step 1: Save Money Aggressively
You don’t need a large salary to become wealthy. Some millionaires started off earning the wages of teachers or librarians. To create wealth, you need to learn how to save using compound interest. You must also appreciate the time value of money (TVM). TVM says the dollar you hold today is worth more than the dollar you have in the future. This is because the dollar from today has the potential to gain more value over time due to interest.
Learning to save feels like the hardest part. The desire to spend must be replaced with the need to save. You should place your savings in a bank account with a higher interest rate compounded frequently; for example: daily or monthly.
Step 2: Invest
You should go one step further to financial freedom and invest the money you’ve saved. Look for financial vehicles that offer compounding interest. Remember, investments carry some risk, so perform your due diligence before committing any money to an investment.
Step 3: Passive Income
Passive income is the money generated from an initial effort that takes little or no resources to maintain. You put in the hard work (or money) up front, and spend the rest of the time collecting returns. Some passive income opportunities include dividends, investment properties, or royalties from an invention or a work of art. Becoming a silent investor in a business or gaining income from a website are some other ways to gain passive income.
Put a Plan into Action and Stop Worrying about Money
Achieving financial independence is difficult but doable. It requires a long-term plan, discipline to stick with it and short-term sacrifices. It is possible to become financially independent using the salary of a regular full-time job. You’ve already taken preliminary actions by joining us at FinancialFreedom.guru. Stay with us, and let’s achieve financial independence together.