9 Steps To Financial Independence

Posted on Apr 3 2017 - 4:41pm by Editorial Staff

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Financial independence is something that so many people strive for all their lives. However, sometimes it can feel like you are running on a treadmill, working hard but never getting to where you want to go. Ultimately, it is never something you are going to achieve overnight, but instead you need to put in a great deal of hard work and effort over a sustained period of time. It all depends how much you really want to achieve this goal and the sacrifices you are willing to make in order to get there.

Rather than just using a single strategy, it is more likely that you will need to combine a variety of techniques in order to get to where you want to go. Take a look at some of these secrets to achieving the financial independence you always dreamed of.

Start With A Plan

Like many things in life, you should start off by having a strong plan in place. Work out your long term goals and the steps you will take in order to achieve them. Calculate your income and all your monthly expenditures. You will then be in a better position to see what cutbacks you can make to your lifestyle. Financial independence is the long term goal, but you need to set a series of subgoals as well as deadlines of when you can achieve your aims.

Separate Income and Wealth

Of course, having a high paying job will make it easier to achieve financial independence, but only if you make the distinction between income and wealth. If you have a big salary but you are spending it all every month, you will be in exactly the same position as if you have a smaller paycheck. Ultimately, your wealth can be measured by the amount of time you can maintain your current lifestyle without receiving your salary. Obviously, the only way that you can do this is by creating other revenue streams for yourself apart from your job but we will talk about this more later.

Clear Your Debts 

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Before you get anywhere, you will need to clear any outstanding debts. You can’t hope to achieve financial independence without doing this. If you have struggled with debts in the past, it is worth taking a look at how credit repair works. All your debts will do is take you in the opposite direction to where you are trying to get to.

Have Surplus Funds in the Bank

The only way that you will be able to achieve financial independence is by actually having surplus funds in the bank. The trick is to increase your income while maintaining or lowering your current rate of spending. When many people receive a pay rise, they automatically start spending more money. You should use this excess capital to invest in different sources. Becoming financially independent is a slow and steady journey rather than a rapid dash to the finish line. Commit to doing the small things each day and the bigger rewards will start to add up.

Diversify Your Income

As well as your regular salary, you need to think about the other ways you can make money through savings, investments and other income streams. On top the income you make actively, you should also be looking to build up your passive income over time as this will be what you rely on to become financially independent. Getting some professional financial advice will pay off in the long run as you can find out the best places to put your money in order to increase your wealth.

Taxes Matter 

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Taxation is a complicated system, which is one of the reasons that accountants get paid so much! If you have a number of different revenue streams, you need to think about the ways in which you can reduce your tax bill in order to keep more of your money. Channeling your income into various different schemes will pay off in the long run.

Be Committed to Making Lifestyle Changes

Cheapness and frugality are two very different things. Many people who make hugely high salaries always seem to be struggling for cash simply because of the lifestyle they lead. The people who end up achieving financial independence are the ones that keep a close eye on their financial situation, as well as their spending habits. They can account for where their money is going every month and won’t end up in a situation where they are shocked when they check their bank balance. In an age of instant gratification, learning to buy the things that you can actually afford can be an invaluable skill to learn.

Always Strive For More

Those who eventually go on to achieve financial independence are always striving for more. As already stated, you need to gradually accumulate wealth over time but you should also be striving for more when it comes to your own skillset. The more skills you have, the more valuable you will be to people and the greater your chances are of increasing your wealth. Keep setting yourself targets and once you achieve them, set yourself more.

Make A Savings Vow 

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No matter what your income is, you should always be able to save a certain percentage. For those striving for financial independence, higher earnings just means more money that you can channel into a savings account. Once you have achieved a certain level of saving, you may then want to channel this into investments that will present you with a higher yield.

Conclusion

These are just a few ways that you can start on the path to financial independence. Remember, you will need to make a long term commitment to achieving this goal and it is not somewhere you can get overnight. Break up your plans into more manageable short term aims and always strive to achieve these on a regular basis. Live within your means and commit to maintaining your lifestyle while increasing your income.

About the Author
Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.