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 tips for achieving financial independence

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.

Financial Freedom

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 Stay with us, and let’s achieve financial independence together.

Roman Zelvenschi

I started a digital marketing agency Romanz Media Group Inc. 12 years ago. Running my own business quickly taught me the importance of cash flow. Making sales was not enough, I had to have money in the bank to pay the vendors, staff and personal bills.

During those early stages of the company I learned how to get creative with debt and to save on interest cost. I paid for everything I could with a credit card to both get more points and to extend the payment date by 25 days (credit card grace period). I then utilized a 0% balance transfer offers to rotate this debt.

I learned a lot during this process and made a lot of mistakes. My key lesson is that the most important part of being financially independent is how much I managed to save, rather than how much I earned. Staying disciplined with savings and tracking spending is not easy and I tried many different methods to stay on track.

FinancialFreedom.Guru is a side project where I and my staff are trying to share the practical knowledge on how to understand finances and to build wealth.