In my role as an independent financial advisor, I talk with lots of different people. Interestingly, one topic that comes up across the diverse groups is that of financial independence. In all the groups I find individuals who say their goal is to retire as early as possible and pursue a lifestyle free from traditional employment. They are looking for a level of financial security that will support their lifestyle of choice…the sooner, the better.
Financial independence and early retirement are possible, but it doesn't happen without a detailed plan and the discipline needed to follow that plan. You have to be smart about the way you invest and spend your money. Since your financial life has various aspects, you’ll need to address a set of goals:
Increase Your Income
You will reach your financial goals more quickly if you can increase your income while maintaining your level of spending. Focus on improving your salary level. Look for opportunities for promotions in your current job and keep open the possibility of accepting better opportunities with other employers. Take advantage of education and training programs that will improve your competitive skill set. If you are self-employed, it means steadily working to keep your business moving up to the next level.
Control Your Spending
Make a realistic personal budget and commit to following it. Your budget will serve as your financial plan for spending and managing expenses. With a smart budget, you will have a good chance to invest successfully in your financial future. Learning to live beneath your means is one of the most effective strategies and one of the biggest challenges to achieving financial independence. The reason it’s so important is that it gives you the power to increase the resources available for saving and investment. It involves practicing delayed gratification – trading short-term sacrifices for long-term financial security.
Boost Your Savings
You should always be saving money regardless of what is going on in your life. Don't wait for some future event, like paying off debt, or getting a raise, or buying the car you need. Postponing the savings habit just limits your time frame and the amount you can accumulate. If you are new to saving, start out by committing a small amount and then increase it over time. Too many people start by saving an unreasonable amount of their income and lose confidence when they fall short on resources for necessary expenses.
If you have been living paycheck-to-paycheck, your first savings goal should be to create a safety net emergency fund. Life is full of surprises that can sideline your financial goals. Having a safety net protects your assets from unexpected expenses. Your emergency fund should have three to six months of living expenses.
Make Smart Investments
Armed with a secure emergency fund, you can shift your focus to investments. By reducing your spending and increasing your savings, you can start using your assets to earn more money. The larger your investment portfolio becomes, the closer you get to financial independence. You don't have to do this on your own. Unless you have expertise in finance, consider getting help from a professional investment advisor.
An independent financial advisor will listen to your goals and help you create a financial plan to achieve them. There are various investment options, like stocks, bonds, and money market funds that can be used to build your investment portfolio. Your financial advisor can help you make the informed decisions that will get you closer to your goal to become financially independent as soon as possible
Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.