Many American adults view the term “financial independence” as not having any debt, while 26 percent believed they need an emergency savings fund and 10 percent believe that being financial independent will help them with being able to retire early.
In our opinion, becoming financial independent is defined as when our lives reach to the point where assets can generate sufficient income to attain comfortable lifestyle, and a day job will become a preference. Becoming financially independent means not depending on your 9 to 5 job any more, you have other sources of income that can sustain your cost of living. The ability to make money while you sleep or even while your work your 9 to 5 job should motivate you to become the best version of yourself. There is no need to work until your 62 to retire when you have the ability to make that change TODAY.
Financial Freedom vs Financial Independence
Financial freedom means that you are having a reliable source of passive income that can help you afford your expenses and lifestyle along with extra expenditures for living a lavish life. On the other hand, Financial Independence means that you earn enough that can support your current lifestyle.
Do you ever wonder how majority of Americans think about having a financial independent life? Do you wish to be free from debts? Here are five tips to help you reaching your goals.
1. Pay off consumer debt
In case you are thinking of buying new cars with financing with monthly credit card payment on top of your minimum payment of student loans, you have chosen a battle against compound interest. The top priority now is to create an aggressive plan in order to paying off debts quickly unless the money you earn would only benefit creditors.
The longer you make minimum payments the harder it is for you to break out of the loan, the minimum payments you make only pay off most of the interest on the note, for you to make a real dent on the note you have to start paying off more to hit the principle.
There are several debt management strategies available such as the Debt Snowball Method and the Debt Avalanche Method. The Debt Snowball Method which is one of the more popular methods, will have you paying the smallest balance account first and then work step by step on paying the card with the largest balance.
The Debt Avalanche Method is similar, but here you would pay more than the monthly minimum on the card with the highest interest rate first, working towards paying off the card with the lowest interest rate. Both are highly effective methods, and choosing one really just depends on your preference. The end goal is the same, GET OUT OF DEBT especially ones that have higher interest rates.
2. Having clear cut financial goals (Motivation)
Becoming financially independent might sound unrealistic; yet it can be accessible if you come up with a plan and lay out a clear & rigid timeline. In order to create something big such as to retire before 65 or in order to travel around the world with your loved one, it can be in your hands if you decide to make sacrifices in your twenties by maximize your savings.
Work hard now so you can play later… well not too late like in your 60’s when you are weak. Try to set a timeline and goals such as if you want to start a family, factor those in your plan. It takes two so talk to your significant other to make sure you both are on the same page together as a team. After a couple of years, you will see the power of compound interest as you save and invest, continue to build and push on that momentum.
3. Saving hard
No need to emphasize enough the importance of saving in order to achieve ultimate lifetime financial goal; especially you are considering to retire early. By using calculator tools and apps on your local mobile device, it is easier now than ever to help you make financial projections through presenting a variety of stimulations to provide money-saving strategies.
A simpler approach in saving money is to automate it. You will be able to accumulate your savings over time by making savings part of your weekly budget list. A mere $5 invested weekly from your checking account to your savings account can be a great starting point. Its about creating good habits and staying consistent with the game plan.
4. Staying away from FOMO
A common misconception lifestyle nowadays is Fear of Missing Out, aka FOMO. To be specific, thanks to the popularity of social media, people are being surrounded with a lot of influences to fall into the belief that spending money on extravagant vacations, clothing, luxury brands will make them feel rewarded. Sometimes the grass is not always greener, you will miss every shot you don’t take, you also will miss shots you do take. The sooner they can realize that they need to focus on the core values of happiness does not come from what we present to social media but deeply from the heart & interactions between others.
5. Live modestly
Lastly, always need to control your budget & set a limit as it does not matter how much money you make if you cannot save it. You be making above the US median of 100k but it won’t matter if you do not save and invest it moderately. Even when you receive a promotion, you cannot be tempted to always upgrade your lifestyle with expensive items. The more money you spend while being young is counted towards the years you need to work as much and will hold you back from retiring early to accomplish other goals and dreams you have.
Quotes about Financial Freedom
Here are some of the best quotes about Financial Freedom from renowned personalities:
- Christopher Rice, an American author said, “Every day is a bank account, and time is our currency. No one is rich, no one is poor. We’ve got 24 hours each“.
- Manoj Arora, another author said, ” Financial freedom is less about financials and more about the freedom”.
- Suze Orman, American Financial Advisor said, “A big part of Financial Freedom is having your heart and mind free from worry about the what-ifs of life”.
