The goal of everyone who is working is to become financially independent. It is a state where you have enough money and savings to support your lifestyle without any form of debt whatsoever. On achieving financial independence, you may decide to retire or keep working because you truly enjoy it.
To many people, financial independence is a myth but it has been shown over and over again, especially in recent years that with the right savings and investment behaviour, financial independence is not far off.
We had a chat with Roger Scott of WealthPress, a veteran stock trader and analyst on how to become financially independent and this was what he had to say;
Roger, what does it mean to become financially independent?
It means that you’re not working just to make ends meet and enjoy the bare minimum of life. You have savings you can fall back on and you can afford to retire way before you become eligible for pension.
More and more people have been achieving financial independence at a young age and this is because of the many avenues one can explore when it comes to investing.
Why is it important to become financially independent?
It gives you a sense of accomplishment. You don’t have to do a job because it’s necessary.
You can simply pursue your dreams. It’s also empowering and it gives you confidence in yourself.
You don’t have to depend on anyone else to get the things that you love.
What is the first step to becoming financially independent?
The first step is to think about what you want to do if you didn’t have to wake up early to go to work every day. Think of the things you’d love to eat, the places you’d love to go and try to calculate how much money that’s going to take.
The larger the scale of what you envision for yourself, the longer it’s going to take for you to achieve financial independence and the more planning you’ll have to do.
In order to achieve financial independence, investing is a must. If you’re one of those who are struggling with investing, you can read on these WealthPress tips.
You should also find the right investment options in order to protect yourself against inflation.
After deciding your lifestyle, what’s next?
The next step is to take a good look at your credit card statements and record your expenses for 3-12 month on a worksheet then try to ascertain how those expenses may need to change with your new lifestyle. For example, if you decide to downsize and move to an area with low cost, you may get to spend less.
On the other hand, you may also have to spend more on travelling and hobbies. You need to find a balance with your spending that’ll allow you to adequately save.
What’s the one thing people who are trying to become financially independent should not do?
The only time you should borrow money is when the gain you’ll get in the long run will outweigh the borrowed cost. If that’s not going to happen, then try to stay within your own means.
The only things you should be borrowing for are things like starting a business, buying a house and investing in yourself. In situations like this, borrowing serves as leverage for you to achieve your short or long term goals.
On the other hand, borrowing money to support lifestyles you can’t afford is one of the fastest ways to drive yourself deeper into debt. You have to pay for the interest of the money you borrowed and that adds to your cost of living.