Financial independence means that you can do what you want in life, without having to worry about money. If you have always dreamed of financial independence and you are ready to start making steps towards this goal, there are plenty of ways that you can start preparing for your ideal financial future.
Though this may seem like a long way off, if you start preparing and planning now, you can build yourself a great strategy for financial independence. There is no point in putting off budgeting, financial planning, and investing, as all these things are best to start as soon as possible.
Manage Your Spending
A key part of becoming financially independent is spending less than you earn so you can put some away for the future. There are so many ways that you can cut down your spending. Elizabeth Warren, senator, bankruptcy expert and one of Time Magazine’s 100 Most Influential People in the World set up the 50/30/20 plan with her daughter Amelia Warren Tyagi as a guide to managing your money for life. The 50/30/20 plan suggests spending 50% of your income on ‘needs’, like housing, food and utilities, then 30% goes to ‘wants’, like shopping and eating out. After this, 20% of your income will go towards savings, retirement funding and paying off debt every year. This might mean that you need to make some changes, like finding somewhere cheaper to live or cutting out takeaways, but all of this allows you to have financial independence in the future.
Sources of Income
It is also smart to think of ways that you can generate more income, both now and in the future. Maybe you could do some extra shifts at work to ensure you have a little bit of extra cash to save every month. Could you do some freelance work as well as your normal job? One good example of earning extra income is property investment, with monthly rent from tenants often covering the buy to let mortgage payments, allowing you to generate and save extra income. Property investment specialists like RW Invest have several lucrative property investment opportunities that are perfect for generating extra income. This also means that your money is invested, so should hopefully go up in value, which leads us to the next point.
Start Saving or Investing Now
If you want to be financially independent in the future, then it is essential that you start saving or investing now. There are a variety of ways you can do this. It is usually advised to have an emergency fund of a few months living costs saved in an account you can easily access, and once you have built this up you can think about what to do with your 20% saving. Investment is usually the best option, as interest rates on saving accounts are low at the moment, and this provides a way to grow your money. As saving towards a financially independent future is a long-term goal, and inflation will mean your money is worth less in the future, investing in a reliable asset like property should help with providing income in the future. Assess the amount of risk you want to take and choose an option that lines up with your goals.