7 WAYS IN ACHIEVING FINANCIAL INDEPENDENCE
Most of us strive hard in order to reach our financial independence allowing us to enjoy the best life offers.
Your road to financial independence can be tiresome and dreadful on so many levels but it is important to take them one step at a time. Celebrate your achievements along the way. Achieving financial independence requires us to be consistent in working hard and working smart.
During the journey to financial independence, everyone may start from a different place. But the taste of success and fulfillment would eventually feel the same. So, we have prepared a financial plan blueprint to which you can use to kickstart your journey to being financially independent!
BLUEPRINT FOR FINANCIAL INDEPENDENCE
1. Understand your financial situation
The first thing to do is to review, assess and understand your financial situation. Are you in the current states of financial independence or are you creeping slowly into debt without you even noticing?
For you to have a clear view of your financial situation, you should list down your total net worth and the assets you currently have. Second, you must identify your liabilities. This includes all of your expenses, bills, debt and payments that need to be accounted for.
Once you have your figures, you can now subtract your total net worth against your liabilities for you to be able to project your current financial situation. If the outcome is positive, meaning your assets overpower your total liability, then you are on the upside of the equation and can improve your road to financial independence. However, if the outcome is negative, meaning your debt overpowers your total assets, then you need to reconstruct your view with your day-to-day expenses to be able to shift it in the upside. A drastic change is necessary for you to be able to have a long-lasting impact on your road to financial independence.
2. Understand how you spend money
Once you discover that your asset to debt ratio is far off, it is now empirical to review how you are managing your expenses. Track your overall cash flow and how you spend your hard-earned cash. In short, you should start budgeting, if you still don’t have one. For those that are already doing so, assess the factors affecting why you are not able to follow your budget plan.
Having a budget plan not only lets you understand how and why your money has gone without you noticing but it will also give you a sense of renewed responsibility for being financially responsible with your spending.
3. Always prioritise paying off debt over mindless spending
Some argue that debts are the anchor to financial independence. But you might have also heard from billionaires and businessmen that debt is not a bad thing. And this might be true on so many levels. Debts can be used to elevate your financial status, but only if you have a clear-cut view on how to use debt, to ease and outsmart your purchase or for expanding your income generating streams to name a few.
But for someone who doesn’t have a clear financial view, debt is stressful and mind wrecking. Especially if it would already affect your assets because of mindless spending. Think of your credit card, for most people they would use the credit cards mindlessly. But these spending are actually loans taken from the banks where these credit cards came from.
For one to be able to start its road to financial independence, you must prioritise paying off debt. Pay off whatever you can and you can start small. By doing so, you can maximise it to the point that it could have a great impact on your total debt in the long run. It not only relieves you from the burden of your financial shortcomings, but it also incentivises you with the motivational push to strive better to tick off your larger debts as you manage it along the way. You will not be able to achieve your financial independence if you are drowning in debt.
4. Invest on your financial literacy
Starting your journey can be quite overwhelming, especially if there are so many factors to consider. There are many online resource materials that you can use to improve your financial literacy. May it be a book, a blogpost, coaching sessions, even up to youtube videos, this can all bring value to your financial literacy. It will give you a great deal of your time into developing your personal finances. The greater our understanding and appreciation of money, the closer we can achieve our financial independence.
5. Cut back on your expenses
Take charge of your spending habits. Take a look at your expenses today. See if you are spending on things which you don’t really need. Avoid spending outside of your means as it would set you back further from your goal to financial independence. You may cut back on expenses that you have so little value from such as memberships and subscriptions that you rarely use. Prepare a list before you go shopping to keep in check the things that you only need so you won’t overspend on items you don’t really need.
You may consider this as merely little acts, but if you put it all together, it can increase the amount of money you can save each month, and permanently decrease your monthly outgoings. This would go along way with your financial stability to improve your financial health so to speak.
6. Consider expanding your cash flow
If expenses of your needs still exceed your asset, then perhaps it is time for you to consider expanding your revenue generating streams. Being employed gives you a secured and stable footing in your road to financial independence, but it shouldn’t be confined with your 8 to 5. With the advent of technology, there are quick ways to make money online through different platforms which can greatly boost your cash flow. Right now, you can consider taking part as research participants through physical and online survey sites, uploading your contents for cash, or venturing into platforms that offer different niches as your side gig which would scale up your revenue opportunities.
All are legitimate and quick ways to make money online that require so little of your time and will not jeopardize your main source of income.
With extra cash on your disposal, you may use it wisely to further expand your horizon for steady passive income opportunities through exploring investment of stock trading, purchasing bonds, and up to real estate investments.
7. Constant financial review is a must
Make sure that you are tracking your spending. It is important to note how aware you are with your spending. Set up saving goals that you should constantly monitor and keep in check that you’re spending wisely. You must retain your emergency savings so that it won’t be touched during rainy days. Being able to stay consistent with your Financial Plan will greatly improve your spending and saving habits. The key is to be consistent and stay firm from any spending temptations.
