5 Proven Ways to Become Financially Independent
While growing up, you must have heard the term financially independent being used a lot by the grown-ups. They might often advise on how to become financially independent. Some may be a feasible option for you, while others may not.
Do not worry because becoming financially independent is not a cup of tea and takes time.
Becoming financially independent by 18 may not be possible for everyone, especially after the economic turmoil of 2008. Everyone thought that they could never attain financial independence. However, the global economy started recovering and performing well after the 2008 crisis, when the new covid-19 pandemic hit and made things worse for a few.
For some becoming financially independent by money, makeover looks like a far-fetched dream. With proper planning, spending, investing and analysis, the dream of being financially independent can still be achieved.
This article will explain what being financially independent means and how you can become financially independent by following some tips.
What does being financially independent mean?
Financial independence is that status you get to when you have enough income and money flowing into your account that you do not have to work to pay the bills.
The term financial independence by money makeover means different for different people. For example, some people call themselves financially independent as they could meet their financial obligations without taking money from their parents or other sources.
Some do not want to quit working. They need a minimum amount of money to meet their needs, and the excess can be used up during their retirement or for investment.
Some look at it as being stable enough to help their family members in their time of need without worrying about how they will make their ends meet. The meaning of being financially independent by money makeover depends on the goals you want to achieve in life.
How to become financially independent?
There is no shortcut to becoming financially independent. Depending on an individual’s income, spending habits, investment options and saving behaviour, one can estimate the time duration needed by an individual to become financially independent. Hence, you should follow these tips for better financial growth and stability.
1. You must reduce your monthly expenses
This will always be the first point anywhere you look on how to become financially independent. Only by reducing your expenses will you save more and get a chance to invest in multiple places.
People who spend 80% or 90% of their income cannot be independent unless they limit their expenses. Spend only on what is needed. For example, buy the groceries and cook your meals. This can save a lot of money.
Do not spend on things that are not needed. For instance, you do not need a second car. However, if you’re leasing the car for rent, that is advisable, as it will act as an additional income source.
2. Try to increase your income
Increasing your income has become a tough task whilst earning more has also become very easy in today’s world. If you have a job, then there are several ways you can grow your income.
For example, if you’re good at something other than the job, you can start freelancing and side hustles to earn additional income. If you have some real estate, then you can put them up for rent.
While growing income, you should always remember that the side hustles are only good as long as you get paid from your full-time job. Therefore, do not let your side-hustles affect your work and career.
3. Invest in multiple sources
When it comes to investing, people often limit themselves to the stock market. That is not the only place you can invest in. You can buy a vending machine or a car wash if you have the capital. That too acts as your investment.
Investing in the stock market, funds, and bonds comes with their risk, and you should not start without learning about them in detail. Hence, you must carefully understand the terms and conditions and then make apt investment choices.
4. Pay off previous debts
Debts are a major liability that pulls you down from your dream of becoming financially independent. If you have any debts such as credit cards, student loans, automobile loans, and home mortgages, then your first step should be to clear the debt ASAP.
You free up a major part of your income for savings and investment by clearing off the debt, and once you start investing and saving in huge amounts, your chances of becoming financially independent skyrocket.
5. Start a business of your own
When you start your business, the chances of earning more is increased by ten times. You focus on your job more and start earning well when you act like a boss rather than an employee.
No doubt, there are risks involved, and the work will increase ten times by starting your own business. But you can write off several items in the name of your business, helping you earn and save a lot more than you did before.
By having a company, you can either increase your income by working for it for a long time or make short term income by quickly selling it after it has gained some attention. Either way, you can retire quickly and enjoy the rest of your days without worrying about earning when you’re old.
These are some tips to become financially independent by money makeover and live a life without having to work a day to make ends meet.