ACHIEVING FINANCIAL INDEPENDENCE
HOW BAD DO YOU WANT IT?
"You'll never change your life until you change something you do daily.
The secret of our success is found in your daily routine."
Last week we celebrated our independence as a country. The Fourth of July will forever be commemorated as the day the United States of America became an independent nation and separate from the British Empire. What day will be commemorated in your life as your day of financial independence? Do you desire to be financially free? Do you already see yourself as financially independent? What does financial independence mean?
Robert Ventour, the CEO/President of Timothy Roberts & Associates LLC, says that financial independence really depends on an individual’s lifestyle and what is most important to them. Therefore, what may look like financial independence to you may be vastly different to someone else. What thoughts come to mind when you think of your own financial freedom? Robert Ventour defines financial independence as when an individual’s assets produce self-sustaining income that meets their living expenses and lifestyle needs.
“Your economic security does not lie in your job; it lies in your own power to produce- to think, to learn, to create, to adapt. That’s true financial independence. It’s not having wealth; it’s having the power to produce wealth.”
There are two ways that the goal of financial independence can be approached; Asset Accumulation and/or Expense Reduction.
- Asset Accumulation refers to increasing assets that generate revenue such as earnings, savings and investments from interest, rent, royalties, fees or capital gains (profit from the sale of property or investments), etc.
- Expense Reduction refers to reducing regular expenses by spending less than the generated income and cutting fixed expenses when possible.
In order to achieve financial independence you have to produce enough income from assets to cover your essential expenses and able to survive without ever working again. Is this an exhaustive definition of financial independence? No it is not, because remember we have stated that financial freedom means different things to each individual. This definition covers those of you who are looking to be financially independent for the long haul, through retirement and beyond. In order to achieve this type of financial freedom sacrifices must be made. Here are some tips to help you on the road to financial freedom.
“The rich invest their money and spend what is left; the poor spend their money and invest what is left.”
Get pass the fear. This is not always easy to do. Sometimes the fear of the unknown can be overwhelming. As a society, we thrive off being comfortable. When we make major changes in our lives the change puts us in an uncomfortable position. But, in order to achieve the financial independence you desire, you have to push pass the fear of being uncomfortable. Once the changes are permanently implemented the uncomfortable feeling will become a “new normal”.
Where are you now? The first task at hand is to know exactly where your finances stand. List all of your current expenses. Keep track of how you are currently spending your money. This can be another scary step because you will finally have to face what your current financial situation looks like. You cannot put a plan in place toward true financial freedom without taking an assessment of where you are now.
Avoid bad debt. Avoid and get rid of high interest debts like credit cards, payday loans, car loans, etc. Declaring your financial independence means getting out of debt as soon as possible. Take one debt at a time, pay it off and do not return to it. Make a commitment to pay off and stay out of debt.
Change your mindset. Don’t fall into following the latest trends and keeping up with your neighbors or other friends and family. Stay focused on your financial goals. Trends come and go. Once you achieve financial independence no one can take that away from you. Feed your mind by reading material that will enhance your financial goals. Keep yourself ‘in the know’. Put yourself in the financial environment that you desire to actually be in.
Spend less than you earn. This refers back to expense reduction. Live beneath your means. Always track your expenses and keep up with where your money is going. Is it a necessity? Is it a want? Will the expense add value to you and your life? This step is very important. If you do not commit to live beneath your means and you do accumulate wealth, you will still be in danger of losing it all. The person that is worth $1,000,000 is in just as much danger of being broke as the person worth $100 if the proper adjustments in spending have not been made.
Pay yourself first. Make saving a priority. Paying yourself first means you get the first cut of your income before one bill is paid. You decide what that amount will be. What is important is that you save something on a consistent and intentional basis. If possible, have the money automatically taken from your check and placed in a savings account.
Delay gratification. Do what you need to do now so you can do what you want to do later. It’s just that simple. Sacrifices will have to be made in order for you to reach your financial goal.
“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”
Be tax smart. The more money you pay in taxes, the less money you have to pay off debt, save and invest. Retirement plans can be the solution. If your employer offers a 401(k), put as much in as possible. Talk to a financial advisor about an individual retirement account (IRA). Retirement plans are the best way to shield your income from taxes.
Keep progressing in your career and/or business. If you can consistently increase your income while living beneath your means… you are on the way to financial freedom. Don’t get comfortable with your income level. Strive to increase your skills and value. Put yourself in the position to be promoted. If you are an entrepreneur, keep your business ideas fresh and advancing forward.
Invest everything above savings. Once your savings pattern is established you can begin to invest. Again, you should speak with a financial advisor to have your questions and concerns answered properly. Investing is where you begin to have your money work for you instead of you working for your money.
“Do not save what is left after spending, but spend what is left after saving.”
Create multiple streams of income. Make yourself recession proof. Prepare yourself for the ups and downs of the job market by creating other streams of income besides your job. Start a business. Turn your hobby into a side hustle. Having multiple streams of income can provide you with the additional money you need to pay down your debt, invest and save.
Purchase good family life insurance. Protect what you have built. The more your wealth grows, the more your coverage should grow. Keep an eye on all of your coverage including health, homeowners, automobile, disability and life. Insurances should be reviewed annually.
Watch the company you keep. You have to align yourself with like-minded people whether they are family or friends. They may mean well but they may not understand your goals. You might have friends who want to go out every weekend, take expensive vacations, shop on a regular basis, etc. You have set goals and make your financial independence a priority! You must stay the course. Once you explain your plans to those close to you, they have to support you in your goals. If they are not a support and instead become a distraction you may have to cut them loose. Remember, sacrifices must be made and that is not always easy.
Refocus on your financial goals regularly. During this process, it will be easy to lose your focus. It is really important to have a detailed, written plan and it is vitally important to review it regularly. Evaluate your goals and plan. Are you making any progress? Does something need to be changed? Does your current plan meet your current needs? Does your current plan fit your life goals? Stephen Covey called it “sharpening the saw” in his classic book The 7 Habits of Highly Effective People.
“To be wealthy you must develop a burning desire for wealth and financial independence”.
Accumulating wealth and obtaining financial independence can be a slow moving process. It’s the small changes that you implement daily that grow over time. Start making changes such as keeping track of your spending, cutting back on expenses, generating extra income and slowly add all of the other tips that we have offered here today. Financial Independence gives you the freedom to make choices. Simply put, when we are financially free we are put in the awesome position of being able to live a life that makes us happy and not solely based on what makes us money. Make your money work for you and stop working for your money.
This particular topic is near and dear to us here at Timothy Roberts & Associates LLC. We want to see you achieve your financial goals and we are here to help! Pass it on to your family and friends. Continue to follow our blog and follow us on Facebook and LinkedIn. Check out our website at www.timothyrobertsllc.com. There is great information there to help you navigate through the financial waters. If you need any assistance, call us!
Your Interest is our Only Interest!