How to Achieve Financial Independence
Does it mean being able to take vacations with your family and friends whenever you want? How about not having to work another day of your life at a job you hate?
Maybe it just means having that extra money you need to send the kids to college, pay down your mortgage and save for your old age.
10 Tips for Financial Independence
Whatever your definition of financial independence, here are 10 ways you can get started achieving financial freedom today.
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Get Off the Paycheck to Paycheck Merry-go-Round
Maybe you spend above your means. Or maybe you don’t make enough to make ends meet. Whatever the case, you can never hope to build financial independence until you find a way to stop living paycheck to paycheck.
First take a look at your finances. Are you spending money on things you don’t really need? Like expensive gourmet coffee when a slightly cheaper brand would taste just as good. Or dinners out when a few more dinners at home would be healthier for your family and cost you less.
Maybe your paycheck just isn’t enough. That’s true for many people with the increased cost of living. If so, maybe it’s time to look for ways to make added income. Focus on things you can do in your spare time while not at work. Consider selling items you don’t need online via Ebay or Facebook Marketplace or offering shopping services via an app like InstaCart.
Make More Money
Now it’s time to build your income even further. Start a side hustle you can maintain alongside your existing job. Online options are often the easiest and most flexible.
Then start looking at your main income situation. Unless you’re in love with your job, look for ways you could be making more money – if possible with less effort. This is NOT about looking for a way to slack off. It’s about finding ways to maximize your resources while minimizing your effort so that effort can be directed elsewhere.
This is part of what’s happening with the so-called great resignation. It’s not about quitting for quitting’s sake – or because you’re sick of your job. It’s about looking at your work as another means of building your financial independence.
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Save, Save, Save
So once you’ve found a way to free up or make more money every week than you need to pay your bills, the next step is to start saving.
But saving should be more than just putting money aside for a rainy day or a big purchase. It’s about building wealth so you can create a new life for yourself. It’s about building security so that you have options and won’t be without resources if your current paycheck stops and you need to restructure.
Start putting money away in a checking or savings account with a low minimum balance. Don’t worry about earning interest at first. Just focus on keeping a high enough minimum balance or enough automatic transfer fees to avoid service fees.
Focus on Passive Income
When looking for side hustle options look for passive income whenever possible. These are options that might take effort or other investment at first. But eventually they should be able to make money without you working at them every moment.
Taking a second job is great. But looking at converting extra space in your house for rent (if your local zoning permits it) or offering to rent space on a service like AirBnB might be better.
Similarly, if you sell online, an Ebay business that requires you to fill orders and ship out merchandise as people buy may be less desirable than creating websites with affiliate links that will keep making money for you even when you’re asleep.
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Figure Out How Much is Enough
A big question you should answer somewhere along the way is how much is enough to grant you the financial independence you seek.
This amount may be different for everyone and it will depend on your lifestyle, perhaps the size of your family or number of dependents.
Arriving at this amount may seem daunting – at first. And you may need to return frequently to this question as your expectations and living situations change.
Avoid picking a big number out of the air. Start with this simple question first. How much would it cost you to live comfortably even if your existing job were gone?
If you no longer needed to work at your regular job, you could use the time more productively. For example, you could build a business, increase your existing revenue streams and still have time to pursue more fulfilling activities. But before you can begin working toward that goal, you need to determine how much money you would need to be making to reach it.
Put Some Money in Conservative Investments
You’ve started to save a bit of money on the side. Now, it’s time to start looking for some conservative investments to help grow your wealth.
In general, focus on so-called high cap stocks – companies with a market value of $10 billion or more. Companies with lower capitalization may offer greater risk because they may not be fully developed. Or they may be at risk of failing due to too much competition or a change in the market.
To pick some good investments to start, look for products and services you and your family and friends use every day. Then do a bit of research before making a decision to invest.
If you don’t have the money to invest in the companies you’re most interested in right away, don’t worry. Check out apps like M1 Finance or Public.com. They allow you to buy a fraction of a successful stock and build your portfolio with only modest funds.
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Avoid Champagne Tastes
This is just what it sounds like. As you see your income rise, be sure not to allow your spending to rise with it.
Avoid extra trips to Starbucks or unnecessary purchases from Louis Vuitton. Of course, you can treat yourself occasionally, but remember that extra money, like extra time – should be poured into achieving the financial freedom you most desire.
And this extends beyond luxury brands to weekly food bills and other costs. Stop buying gourmet coffee, if a cheaper brand tastes just as good. Don’t shop at Whole Foods if your money goes further at Costco. And don’t keep paying rent at that luxury apartment complex with the gym and the swimming pool you never use if a cheaper apartment would suit you just as well.
Look for Hidden Talents to Monetize
Do you create crafts, write effectively, take photos, build websites. All of these talents can be monetized online.
You could create and sell crafts on a website like Etsy. You could offer writing services to businesses who need the proper verbiage for their website or need someone to write regular blog posts or social media messages.
If you’re good at photography, you could sell images on sites like Shutterstock and Depositphotos. And if you build websites you could offer that service to businesses, organizations or individuals in need of an online presence.
And this is just the tip of the iceberg in terms of talents you might be able to monetize.
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Look for Competitive Interest Rates
Gone are the days when your neighborhood bank had all the services you and your family could ever need. That’s especially true when it comes to the interest paid on your accounts.
Wells Fargo for example, with about 8,000 branches nationwide and about 13,000 ATMs, offers a measly .01% interest on a savings account according to NerdWallet. So if Wells Fargo is your local bank, you may be out of luck.
Fortunately – as is often the case – the internet provides an easy answer. You can offer accounts online from banks offering better interest rates Marcus by Goldman Sachs and Lending Club. Though the amount of interest may depend upon the size of your balance.
Dump the Costly Commute
With gas prices soaring, the less you use your car the better. And for many, the highest gas bills result not from occasional family trips or visits to the mall. It’s from the daily commute into work.
One simple solution might be to see if there’s a way to ditch the commute. There are certainly businesses – like coffee shops, restaurants and brick and mortar retail – where on site staff is needed.
But if your job consists of driving to an office 30 minutes to an hour a day just to sit in a cubicle staring at a computer screen, well, you could do that at home.
See if you can convince your employer to work some of all of the time at home thus cutting down on your need to commute.
If not, start looking around for opportunities that allow telecommuting. Begin by calculating the amount of gas you spend for daily commutes. You may be able to switch to an online job making slightly less money – but not when you factor in your savings at the pump.
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