Becoming financially independent seems like an unattainable goal, but that’s only because that’s the way we have been thought to think about it.
If you have any disposable income there is a huge pressure to spend it in thing that we now call “necessities.” or in luxuries because “we deserve it.”
Whenever I ask a friend if I should buy this thing or the other, they always say: “Yes! go for it. You deserve it.” and then they congratulate me when I get the thing.
On the other hand, putting money in my savings account is invisible. No one has ever told me: “Congratulations for saving that additional $100.”
However, money in the savings account buys flexibility, it buys options. It buys the possibility of saying “no” to a job that I wouldn’t want.
Steps to gain financial independence
1. Save: The first step to gain that financial independence is to save. Put money aside so that it can work for you. Whether you put aside a percentage of your earnings, or a fix amount, it doesn’t matter. The important thing is that you get into the habit of saving.
As a photographer, I know of plenty of people who go All Out to celebrate a birthday, an anniversary, an engagement, whatever, and then then next day they are confronted with their credit card debt.
In my opinion, it’s better to be more frugal, but then have ownership over your time, life, destiny.
2. Get rid of high interest debts. One of the biggest road blocks people have when building wealth is those credit card debts. Credit card debt carry 18%+ interest. Make it a point to never have credit card debt.
3. Don’t fall for get rich schemes. I heard all kind of get rich quick schemes, but the best way to get rich is to put a bit of money aside every month and invest it in low cost, broad market index funds such as the Toronto Index, the S&P index. PLEASE, don’t put any of your money into crypto currencies, gold, or even real estate (real estate is not an investment, its a job).
4. Think long term. When investing, always invest with a time horizon of 10 years or longer. Markets go up and down over time, but on the long run, they always go up. Check out this graph. No one with a time horizon of 20 years has ever lost money. On the long run, the stock market IS NOT risky.
How do you know you have achieved Financial Independence?
I am a believer of the 4% rule. I have to accumulate 25 my annual expenses to become financially independent. For me, that’s quite easy. My annual expenses are $20,000. For me, to be financially independent all I need is 500,000. So far, I have $400,000. If the market rebounds to same levels as January 2022, I will reach my Financially Independent number once again.
Where are you in your financial independence journey?
Share your story in the comments or send me a private message.
Other personal finance blog posts
- The end of the year is coming. Are you updating your will?
- Tip of the day: Never buy Gold or any Crypto assets
- Free money from the Quebec Government $400 to $600