How to Become Financially Independent

Financial independence is something we all strive for. Everybody wants to live a life of freedom, where bills and necessities don’t make us worry. 

Reaching that point takes time and effort, and you must be ready to roll up your sleeves. 

If we want to reach our goals, we have to develop habits that will help us. 

This article will explain how to become financially independent, why it’s essential, and what can help you reach that goal. 

Table of Contents

    What Is Financial Independence?

    For most people, financial independence means having enough money to pay your bills and be debt-free, but it’s more than that. 

    It’s also about creating a financial system so you can afford to live the life you want to live. To work because you want to and retire because you want to. To create financial stability.

    Financial independence isn’t just about money. It’s also about time. 

    It’s about being able to afford to give yourself the time you want to spend with your loved ones or do whatever you enjoy doing, without worrying about living expenses or credit card debt.

    Why Is Financial Independence Important?

    Becoming financially independent gives you freedom.

    It gives you the freedom to choose what you want to do, whether it’s about your career or personal life. It lets you live the life you want to live, stress-free. 

    And when you get on that journey of building your wealth and creating a safety net, you’re also building yourself. You become more knowledgeable, more organized, and less stressed overall. You build your risk tolerance.

    You learn how to manage your finances, mindset, and emotions. This is, once again, why the path to financial freedom isn’t just about the money. 

    How to Become Financially Independent

    It would be perfect if we could snap our fingers and become financially independent overnight, but that’s not how it works. 

    It takes time, effort, and careful planning to gain financial independence, and you need to look at it in the long run. 

    But that doesn’t mean it’s impossible. It means you must develop some habits and be disciplined, and it will stack up over time. 

    Here are some things that can help you reach financial freedom.

    Accept Responsibility

    It’s very easy to look at our circumstances and blame everyone and everything, including ourselves. 

    You’re the one behind the wheel. Sure, it’s a bit uncomfortable to realize that the road is more challenging in some places than others, and you’ll still have to drive through, but this is where real growth happens. 

    To reach financial independence, we need to be ready to face the music and learn how to handle whatever is thrown our way because we are in charge of our time and emotions.

    So it’s time to stop blaming, forgive, and hold yourself accountable. 

    Set Goals

    Getting from point A to point B means that we know what point B is. 

    When it comes to becoming financially independent, setting a clear goal and creating a financial plan are a must. Only 30% of Americans have a long-term financial plan. 

    Think about the lifestyle you want to live. Do you want to live in a big house with your family? Build retirement savings? Travel the world? It’s not just about long-term goals. It can also be about a lot of short-term ones. 

    Imagine this life. Write it down on a piece of paper. And then reverse engineer it. 

    How much money do you need in your bank to live that lifestyle? How old do you want to be when you reach that goal? What is your current financial situation?

    Set the deadlines and financial mileposts, define the steps, and it will be much easier to become financially free. 

    Know What You’re Spending Your Money On

    Before changing our financial habits, we need to know our current ones. Are they serving us in the long run, or are they slowly chipping away at our wealth? 

    Take a look at your bills and bank account statements and get to know what you’re spending money on. Identify your needs and wants, and see what portion of your money goes where. 

    Many people can’t reach financial independence because they spend money they don’t have on things they don’t even really need. These are just some basic lifestyle changes you’ll have to go through for your financial health.

    When you know that your spending habits aren’t serving you, it’s easier to change them.

    Budget

    Budgeting is something that a lot of people skip, but it’s a crucial step for reaching financial independence. 

    After you analyze your spending, create a monthly budget based on your income.

    If it’s your first time creating a budget, we recommend using the 50/30/20 method. With this method, you put 50% of your income toward needs, 30% toward wants, and 20% into your savings account. 

    If you realize that this method doesn’t suit you, you can always change it. Just stay disciplined. 

    Saving money is what makes budgeting important. You can use your savings as an emergency fund and an investment. 

    Pay Yourself First

    Speaking of savings, start paying yourself first.

    When you get your paycheck, put a portion of the money into your savings account before you do anything else to create a financial cushion. 

    Yes, even before you pay your phone bill or car insurance.

    You could set up automatic savings so a portion of your money is deposited directly into your account as soon as you get the check.

    Also, if your job offers matching contributions to tax advantaged retirement accounts, make use of it! It’s essentially free money and a good way to build your retirement fund. However, don’t put all of your safety net in this type of nest egg because the funds are harder to access.

    If you leave your income lying around until the end of the month, you’re more likely to spend it. This way, you’re putting a part of it toward your future. 

    Invest in Yourself

    Speaking of the future, investing in yourself is a must if you want to achieve financial independence. 

    And most of the time, what you need is something other than material things. You should invest in your physical health and your knowledge if you want to achieve financial freedom. 

    There’s no point in achieving financial independence and getting to spend our income however we want if we have to spend it on medical issues for things we could have prevented. Some employers even have limited sick days, which means you lose income if you can’t work.

    Plus, poor health maintenance can make insurance premiums skyrocket. If your job offers health insurance, take it.

    Also, never be afraid to pay for good advice. There are people out there who know a lot about finances and have been in this game for a long time, and getting knowledge from them can help you become financially independent. 

    So search for additional resources, and don’t be afraid to learn new things. They’ll help you get rid of debt and create the life you want to live.

    Learn How to Invest

    Even though saving money is a big part of financial freedom, your wealth isn’t going to grow if you don’t invest. Money needs to be in constant motion if you want it to increase. 

    It’s good to save money, but if it’s not invested in any way, its worth will decrease due to inflation. You need to start investing to gain income generating assets if you want financial freedom and early retirement. Especially when it’s so hard to retire with a lower monthly income.

    You can learn to invest and create passive income from other people or hire a financial advisor to help you design a manageable portfolio and reach your financial goals.

    Live Below Your Means

    If you want to achieve financial freedom and live the life you want, you’ll have to live below your means first.

    Overspending on unnecessary expenses and stuff we feel FOMO about sounds great in the moment, but those emotional decisions don’t get us anywhere. Your living expenses shouldn’t be greater than what you earn.

    Credit card debt is something you especially need to be wary of because your credit score will impact credit approval. A good credit score leads to higher loan amounts with a lower interest rate.

    Get a Financial Team

    Sometimes we can’t do it all by ourselves, even when we have a set goal in mind. But a strong financial team can help you reach your financial goals. 

    A financial team can help you with everything from personal finance and retirement planning to figuring out a debt strategy and handling your investment portfolio. You tell them what your target is, and they’ll support you on the path. 

    Remember that they’re there to help you reach results, and you’re the one who’s defining your goals. 

    Wealth Is a Mindset

    Last but not least, it’s all about your money mindset

    Our minds are mighty, and how we view money has a huge impact on achieving financial freedom.

    If you look at money negatively and constantly think there’s not enough of it and you don’t deserve it, money won’t come to you. You have to understand that money is a tool. 

    And you control your tools. They don’t control you. 

    Remember, true financial independence is about time. 

    Own Your Own Lifestyle

    Financial independence is all about setting up systems that will prepare you for anything that happens. 

    Do you want to build savings? Retire early? Buy a bigger house? These are all big financial plans. 

    But it’s also about establishing an emergency fund and being able to take on whatever unexpected expenses life throws your way. 

    One of the ways to be ready for anything is to invest in a whole life insurance policy. With the right policy and knowledge of how to use it, you can be prepared for anything that comes your way and achieve financial independence faster. 

    At Wealth Nation, we can help you design a policy that you can use to own your own lifestyle. 

    How?