In this world, there are many ways one can become financially independent and well off. However, they don’t really know the steps to get there. Some of the people we look up to will say that the way to get ahead financially is through going to college, getting a stable career, and getting promotions. However, this advice fails to cover the basics of both saving and investing. For example, if you get a good career making $100,000 per year and you spend $99,000 per year, you are not financially independent! In this article, I’m going to be breaking down the basics of becoming financially independent. Let’s get started!
1. Income and Expenses
How much money you make and spend is the first step in becoming financially independent. If you don’t earn enough income, you have to create another source of income that creates consistent cash flow. This could either be from a side hustle or from starting a business. On the other end, you have to focus on limiting your spending if you want to build wealth. The larger the spread is between income and expenses, the more money you can save and invest. This is our next topic.
2. Saving and Investing
Once you have sufficient money coming in, make it a monthly goal to save 15% of your total income. As always, save more if possible. By doing this, you give yourself the ability to invest that money back into your business or into other investments that will build up overtime like stocks, mutual funds, bonds, etc. Overtime, you’ll be able to add more and more money into these investments. By utilizing compounding interest within the markets, you’ll end up with a large sum of money in the future. Overall, this is just one of the many ways to create financial independence for you and your family.