lzf / Getty Images/iStockphoto For some, financial independence seems like an impossible dream and probably always will be. Others, who are more optimistic, might believe sheer determination will get them there.
Learn More: Stimulus Updates To Know For Summer 2022
Small Business Spotlight 2022: Nominate Your Favorite Small Biz
While a positive and determined mindset is a move in the right direction, it takes much more to achieve a state of financial freedom. To get closer to living the life you want, here’s what you need to know to become financially independent, according to a few experts .
Life Insurance Offer: The only term life insurance that never requires a medical exam – ages 18-60. Get your fast, free quote now. What Is Financial Independence?
“Financial independence is the state of having enough money saved and invested to cover your living expenses for the rest of your life without having to work,” said Claire Hunsaker, a chartered financial consultant and CFO of AskFlossie . “It doesn’t necessarily mean retiring in the lap of luxury. For most people, it means choosing how they want to spend their days, without the constraints of a 9-5 job. Many financially independent people still work part-time managing their investments or at a company they own that provides passive or semi-passive income.” How To Become Financially Independent
The steps to become financially independent aren’t particularly complex, but they do take time and commitment to achieve. “The key is to remember financial independence is a long game — it doesn’t happen overnight,” said Steve Sexton, financial consultant and CEO of Sexton Advisory Group . Here are the steps to take. Calculate Your Future Financial Needs
Knowing the amount of money you’ll need to become financially independent is key when working toward your goal.
Life Insurance Offer: Instant coverage upon approval. Get a quote in seconds and apply online in minutes. No medical exam ever – ages 18-60.
“You can do this by multiplying your future income by 30 to set your savings goal, utilize a retirement calculator online to create a forecast, or enlist the help of a financial advisor to get a more accurate picture of what your future financial needs could look like,” said Sexton. Evaluate Your Spending
Even if you think you have an airtight budget and no dollar is wasted, take the time to evaluate where your money is going each month.
“Write down all your expenses to get a holistic picture of what your spending looks like,” said Sexton. “Then, do your best to eliminate or cut back on unnecessary expenses (this could mean swapping out cable for more affordable streaming services, refinancing your mortgage, negotiating better rates on auto insurance or your phone bill, etc.).” Eliminate Debt
Starting now, make it a point not to take on any more debt and start paying down the debt you do have.
“Eliminate debt as an option in your life,” said Jay Zigmont, Ph.D., CFP(r), founder, Live, Learn, Plan . “Debt is stealing from your future, and if you are looking to achieve financial independence, you need your money to work for you, not the bank.”
Life Insurance Offer: Rates start at just $10/mo. No medical exam ever – ages 18-60. Get your quote in seconds and coverage in minutes, if approved. Set Up an Emergency Fund
“You’ll also want to create an emergency fund containing six months’ worth of expenses to ensure you’re covered in the event of an unexpected emergency,” said Sexton.
Having a fund to draw from in an emergency can save you from having to make rash financial decisions, such as putting expenses on a credit card or taking out a high-interest loan, which creates debt. Invest
Investing is a smart way to increase your wealth as long as you have a solid investment strategy.
“Invest in a diversified mix of income-generating assets,” said Hunsaker. “This could include everything from rental properties to stocks and bonds. The goal is to have a portfolio that provides enough passive or semi-passive income to cover your living expenses. Also, it helps to have one that is diverse enough to maintain you even if one stream of income fails.”
Zigmont agrees that investing is key, but also advises to follow the general rule of only investing in things you understand. “Take the time to learn about what you are investing in, how it impacts your financial plan, and where to keep the investments (which types of accounts),” he said. Earn Extra Income “You might consider taking on […]
source How To Become Financially Independent, According to 3 Experts