Hi, I’m Allan from The Practical Saver and today I’m going to share with you how to achieve financial independence.
Financial independence is something that a lot of people aspire to achieve. Unfortunately, not all of these aspirants will ever achieve it for many reasons. This does not mean that you should stop from striving to become financially independent just because a lot of people have failed or will fail to do so.
In reality, we are surrounded by both positive thinkers and haters. You would probably see and hear more haters than positive thinkers. I used to swim in a sea of debt to the tune of $40K. Had I succumbed to the belief of these haters, I would not have solved my debt problem.
I chose to listen to the positive thinkers. As a result, not only did I pay off $40K of debt but I also saved $70K, at the same time, in 2.5 years. Quite awesome, right?
Achieving financial independence is not easy but it’s doable. If it were easy, then, almost all people would be able to gain that financial independence.
Chances of you attaining that independence is greater if you take the following points of view into consideration.
Create your own roadmap
One of the best things I learned in life is that I should never base my actions on what other people are doing or not doing. Basically, this was the first lesson I took into heart and action when I started dealing with my debt problems.
It really is easy to get discouraged to continue much less start solving your own financial problems when you see a surrounding filled with people who can’t solve their financial woes. Remember that you carve your own path. You need to remind yourself that your situation is unique to you and that you are in control of changing your situation for the better.
It’s hard to succeed when you don’t have faith in yourself to begin with.
Pay yourself first
When you are trying to pay your debt and are dedicated to paying it debt, you may be tempted to pay as much as you can and leave a small amount for savings. If you already have a lot of money saved, then, it is best to pay off your debt right away and leave just enough in savings to cover your needs (e.g. grocery, emergency, and some leisure). If you don’t have enough money saved, then, you may need to consider paying yourself first before your bills. Why?
There are situations in our lives that we cannot control (i.e. emergencies). Do you have the funds in case these emergencies occur? How are you going to pay for these emergencies when you don’t have money saved to pay for them? It is recommended that you save three to six months1 of emergency funds.
Maybe it’s me but I like to see some money in my accounts. This saved money becomes my motivation to work harder, earn and save more money, and pay my debt.
Live below your means
If you are making good money but can’t seem to save, then, that means you are overspending.
One of the ways that my wife and I adopted to save more money while paying the debt was to live below our means. Up to this date, we still live below are means but we do have some wiggle room for small leisure.
As you try to save money or pay your debt or both, attempt to cut down on a lot of expenses. If you can cut out some, that’s even better. Some of the areas you can easily cut are cable services, gym subscriptions, and eating out. Stay away from the wants as much as possible and focus on the needs only.
Have a budget
No matter how much or little money you make, it is always necessary to have a budget. If you do not have a budget in place, you may not know which areas you are overspending. Budget allows you to track your income and expenses. It helps you determine which areas you are spending more and spending less.
There are numerous methods of budgeting out there. You can use a spreadsheet or jar system for budgeting. It doesn’t mean that you have to follow what everyone is using. My budgeting method may work for me but not for you but that is ok. We all have needs and requirements and those are different from one person to another. You can always create and adopt any budgeting method as long as it works for you and you stick with it.
Do not worry if you cannot follow your budget right away. There’s learning curve in budgeting. It will get better with time, practice, execution, and discipline.
One caution is that a budget does not need to be set to stone. Your situation can change dramatically from one month to another. So, don’t feel bad when you need to change it. Changes come. Sometimes, they come at the most unexpected time.
Continue what you do
Financial freedom is not achieved when you have finished paying all your debt. Independence is achieved by continuously being debt-free. Don’t go back to your old ways and build a mountain of debt again. If you do that, you’ll never gain and retain that financial independence.
Of course, change does not come easily but it will happen when you mix discipline, perseverance, and faith in what you need to do. If you want to be and remain financially independent, you should make an effort to change your situation. Among the best ways to change it is through adopting the information laid out above.