Financial independence means different things to different people. However, when most think of financial independence, they picture a time in their lives when their assets are generating enough income to cover their living expenses so that they never have to work again. For some, financial independence is far off in the distance, for others it's within close reach. Wherever you fall on the spectrum, here are some financial maxims which will speed you on your way to this destination:
1. Spend less money than you earn
The amount one earns is not always under our control; spending usually is. This simple rule of making sure some money is left at the end of the month applies, no matter what your income. Learning the skills to follow this simple rule is the foundation for other financial rules and successes, so it’s well worth the time and effort required.
2. Know what you spend
You cannot live within or below your means without knowing what your expenses are (and therefore where you can start cutting.) The simplest plan is to write down everything you spend, whether by check, cash or credit card, for 1 month. For those who lean toward computer literacy, using accounting software, such as Quicken, or budgeting apps such as YNAB (You Need A Budget) or Fudget, will do some of the work for you. And you can download data direct from your bank and credit card companies to these tools.Spreadsheet templates are also available online to streamline this process.
3. Eliminate Unnecessary Living Expenses
Take a critical look at your expenses. Look at each item and ask if and how you could reduce the monthly cost. Are you spending over $100 per month for cable TV, for example? Try using a streaming service such as Netflix or Amazon Prime and save about $1,000 a year. Plan to take your lunch to work as often as possible. Hundreds more in savings per year. Look everywhere and be creative and ruthless.
4. Get Into Daily Financial Awareness Habits That Result in Wealth Accumulation
If your daily habits include a stop at Starbucks for that $5 latte, you are spending $100 a month. You could save another $1,200 a year by learning to make good coffee at home. Look for ways to save costs and expenses through coupons and sales. Talk with your insurance agent about possible discounts. Are you feeling the creative juices start to flow here?
5. Concentrate on Doing Well at and Keeping Your Job
You cannot obey financial rule number one without the income from your present employment. There is a correlation between job satisfaction, promotion and ever-increasing earnings. If you are bored, unchallenged and unhappy with your work, you need to take steps to resolve the matter or you will be stuck in a financial rut.
6. Avoid Money-Making Schemes and Scams
No matter what the slick infomercials and bombastic websites shout out, there is no shortcut to wealth. Anyone who advertises the possibility of sudden, easy money by buying their plan or attending their seminar (for a fee) is likely only interested in making money from you. That meets their financial goals, but detracts from yours.
7. Pay off Your Debts
If you are bogged down in heavy consumer debt, you are not alone.Try the time-tested plan of freezing spending on credit cards, then paying them off by starting with the highest interest rate card first. If debt is a confusing web you despair of escaping from, reach out to a reputable credit counseling service. Paying off debt may take some time, but it is well worth the effort.
8. Pay Your Monthly Credit Card Bill on Time
If you’re carrying a monthly balance on your credit card, you’re swimming upstream in your quest to get out of debt. Consider instead using a bank debit card, or at least design a reminder tool to alert you when that monthly payment deadline is near. Depending on how many cards you have, this habit could save you a hundred dollars or more a month in fees and interest.
9. Begin a Savings and Investment Plan
Start small if you must, but save something each month. You’re in this for the long term and your goal is to be debt-free and to accumulate real wealth (i.e., to be financially independent). Contact a holistic financial planner to help you find the best investments to make your nest egg grow.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.