Stories of how twenty, thirty, and forty somethings have saved a million dollars and are now living it up in early retirement seem to be plentiful these days.
It’s amazing that with hard work and self-discipline you can create an unconventional life path if that’s what you choose to do.
While I’m definitely NOT on the path to retire early (I bore way too easily) I do think working toward financial independence is a worthy goal. Here’s why.
Eliminate Financial Stress
I’m a big believer in working toward making your financial worst not so bad. And what could be a better way to do that than true financial independence?
Being financially independent means that you have enough money in investments and other income sources to cover all of your expenses indefinitely, without working a regular job. When you get to this point your biggest financial worries will be investment returns rather than having enough to pay the bills.
Pursue Work You Love
When you’re financially independent you don’t have to rely on a regular job to get by and can instead branch out and do work you love. (Or do no work at all.)
While you can still do this on the side of your day job it would be nice to not have to worry about the work you love paying the bills.
Pursue the Life You Want
When you’re not required to be at a job every day you can pursue the life you actually want to be living. You can give more, volunteer your time, or work on your hobbies.
The sky really is the limit, especially if you have a partner or someone else who can pursue these dreams with you.
Some Steps You Can Take to Work Toward Financial Independence
Working toward financial independence is a worthy goal but it’s definitely not easy. Here are some steps you can take:
Determine What You Need
You can’t reach your goal if you don’t know what it is in the first place. You can start by using one of these calculations to see how much money you’ll need. You should also do some researching and run multiple scenarios to see what it’s really going to take to support you in early retirement.
Pay Off Your Debt
Debt, especially high interest debt, is a huge barrier when it comes to financial independence. Other than building an emergency fund if you don’t already have one, your first step should be paying off all consumer and high interest debt.
It’s going to be really hard to reach financial independence without investing. There are tons of different options when it comes to investing so you if hate the idea of the stock market you’re not out of luck. Things like real estate or investing in your own business can also provide great rates of return.
Look at different investment vehicles that will coincide with your personality and goals.
Pay Off Your Mortgage
Housing tends to be one of the largest parts of any budget. By paying off your mortgage you’ll drastically lower the income you need to support yourself and your family.
Lower Your Budget
If you want to save more money you’ll have to either lower your spending or increase your income. To really get ahead you can take a double pronged approach.
Take a look at your budget and make cuts where necessary. Do keep your budget reasonable though.
Increase Your Income
If you want to speed up that financial independence date you need to increase your income. If you’re working with a low income it’s going to be hard to hit financial independence no matter how much you cut your budget.
Set a Timeline
Setting a timeline will help you determine exactly how much money you need to save each month. The timeline can also motivate you to keep going when times get tough.
While financial independence is definitely a worthy goal it’s not going to be easy to accomplish. Make a plan, follow it and when you fall of track jump back on!
Are you working toward financial independence?