Since the dawn of modern times, society has been telling people several myths and false preaches about money and Financial Independence. The problem is, these myths are still fed to the people of our generation. For example –
We all have been taught by our parents, relatives, and other people that the only way to have a good life is to go school -> get good grades -> get into a good college -> Get a great job and work until you die. They have been doing it all their life, and now they want us to do the same. Not because they are evil or something, its simply because they love us, care for us and want us to be financially stable.
The only evil here is the myth that has been spreading all across. Think about this –
You completed school, college and got a good job. Now you go to the office every day, work for 9-10 hour and get salary credited to your account at the end of the month. Now that money is used to meet your necessities, needs wants and whatever you can think of.
Now repeat the cycle for the rest of your life. Do you see any happiness here? Do you feel satisfied? What if you are sick or want a vacation for a month? Will your employer pay you then? Will you ever be able to call yourself Financially Free? No. This may be called Financial Stability but not Financial Independence.
Table of Contents :-
What is Financial Independence?
The first step to understanding Financial Independence is –
Know that your Income is not Wealth. Active Income cannot make you wealthy.
It doesn’t matter how high paying your job is; you are still using your time to get that money. And that does not make you financially independent. You can amass assets and all, but there is no guarantee you’ll become financially free.
Financial Independence is when you do not have to worry about money and expenses even if you do not work for quite a time. To become financially independent, the two main steps are –
- Saving & Investing loads of money.
- Cutting down extra and wasteful expenses.
These two steps majorly determine your freedom. How you use your money makes all the difference. That is why a millionaire singer can go broke, and a bus driver retires a millionaire.
Financial Independence is a Long-term game.
You must be willing to take your saving and investing game for the long-term if you want to become financially independent. First, let me make it very clear – Your income level is not at all significant in this game. You may have an income lower than most of the people, but you’ll still retire, accumulating more wealth than many high-income people. That is – if you play the game right.
Now, how long can this long-term game be assumed? I say it depends. It depends on how much wealth you want to accumulate, at what age you want to retire, how much can you invest every month, and so on. The period can be 10 years from now, 20 years from now or 30-40 years. It all depends. You can invest a portion of your income every month. If it seems less and you want to invest more, you can always put up some side hustles or part-time jobs to get more money and invest more.
In short, there are numerous ways to earn money and ample ways to invest money.
You can read this article –
——- Side hustle and part-time job ideas to earn more money ——-
The 50/30/20 Rule
Now, I know you too want to become financially independent, and there is a high chance that you might not know the inside outs of finances, investment and capitals. I get it! Even I didn’t know anything about saving, investing and becoming rich. But I did it, and I’m feeling happy that I’m about to tell you the same thing by which I started my Financial Independence, Retire Early game.
The 50-30-20 rule takes normal people into consideration who do not know much about finance and money. This rule states that you should –
- Use 50% of your income on your daily needs and requirements, i.e., Food, House, and other necessities.
- 30% of your income can go for your luxuries, wants and other things that make you feel rewarded or good. In short, to enjoy the money you earned.
- Now, the rest 20% must go into investing. Not only saving but investing!
Following this rule, you can easily end up with a hefty amount after 15, 20 or 30 years, depending on your investing period. However, this number states the bare minimum. That means you should invest at least 20% of your income. Again, this is the minimum %. If you can go up to 30% or 40% or 50%, then do it right now.
The more you invest, the more amount you’ll be left within the end.
Guide to Start your Financial Independence Journey
- First of all, decide! Decide that you want to enter the game. Then know the rules and finally, get on track.
- Save more money than you ever thought. It doesn’t matter whether your income is high or low; just save as much as you can.
- Cut down your wasteful expenses. Stop spending money on the things that are not necessary. If you want to buy something, wait for a week. After a week, if the urge is the same, then buy it. Otherwise, save!
- Create an Emergency fund that can cover at least 6-8 months of your expenses. This might not look important, but it helps a lot in times of crisis.
- Now that you have everything taken care of, now comes the most important part. Make your first Investment decision. Prepare your mind for the casualties and the rewards of the investment market first.
Start Investing ASAP! I do not need to emphasize this part. The best day to start investing was yesterday. The second best is – today!
The Most Important Step – Set your End Goal
Well, you can’t just go saving and investing without having a clear goal in your mind. Your goal could be to become financially independent by the age of 40, or say you want to buy a house at 35 or retire at 50. Your goal can be anything.
The point is – have a clear vision so that the process all along won’t eat you up. Instead, you’ll have a goal to achieve, and you’ll work hard for it.
Keeping a goal in mind, you can adjust your investing, saving, and expense ratio better. You can hire a financial advisor to help set your goals and investment options. Or you can contact me! I’ll give you a bonus – I’ll charge no money! Isn’t that great? I’m not as great as a Financial Advisor, but I’m free!
However, this was a simple, straightforward article on Financial Independence and how you can start your journey towards it. Now all that’s left is for you to take action. If you start your journey from here –
I want to tell you that this journey of Financial Independence requires a lifelong commitment to saving and investments. So, commit yourself to your goal, start investing and enjoy the process between! It’ll be fun and peaceful at the same time!