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How to Get Rich and Achieve Financial Independence

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How to Get Rich and Achieve Financial Independence

If you’re coming here for another get-rich-quick scheme, this is not the article for you. I’m not about to sell you on a pie-in-the-sky fairytale that will have you driving a Maserati into the driveway of your mansion by next May. But if you’re looking for actionable advice on being smart with money while working hard to achieve financial independence, then let’s explore this concept further together.

First, let’s clarify by what I mean by “rich,” as this is a very nebulous term. The definition of “rich” is as individual as taste preferences of food or fashion. Many times, even when you are considered by others to be rich, you don’t think of yourself that way. After all, it’s all about perspective. In poorer countries, people would consider $20,000 per year to be rich, where in more prosperous countries, it is considered poverty. So, to make this topic much easier to follow, I will leave the number of what you would consider to be rich up to you. Whatever it is, here are some important concepts to ensure success.

Keep Breathing Room in your Budget

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breathing room for wallet

    No matter what your paycheck says, if every bit of that money is allocated to paying someone else, you will never feel rich. Only you can decide what percent of your paycheck you want to live on, but I don’t recommend pushing it to 100%. Keep your expenses down to a level where you aren’t strapped every month. You can have the most amazing home, car, and high-paying job, and still be stressed out and unable to pay your bills. Live within your means and save the rest of your income to build up your long-term economic equity.

    Limit Expenses on Bobbles and Bling

    diamond ring

      Whenever you are about to buy something, consider if that is the best investment for your long-term financial goals. Now, I’m not saying don’t enjoy life, but keep in mind when you buy that boat, that brand-new car, the time-share in Tahiti, the new diamond earrings, or that designer leather jacket, that you are making a purchase where you are most likely losing money. The boat, car, time share, earrings, and leather jacket will not normally gain value over the years. The more you limit these expenses, the more money you can keep for smarter investing.

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      Stop Living to Impress Others

      Sometimes, we can make some very foolish decisions to impress others. The sooner we understand that our self worth is not tied up in our possessions, the more likely we are to achieve financial independence. Keeping up with the Jones’ means a very flashy facade of big-ticket purchases followed by years of financial struggle to pay back the debt with interest accrued. There is no shame in driving a used car with some miles on the engine or finding clothes in thrift stores. You will have much less stress than those working extra hours at jobs that they hate to pay their high credit card payments.

      Avoid Debt, Unless It Makes You Money

      While no debt is necessarily embraceable, there are a few scenarios where debt is often necessary. For example, my husband is in medical school. Since most people right out of college don’t have $250,000 lying around to attend medical school, taking out loans is often the only option. Education loans eventually pay you back much bigger dividends in higher earning potential over the rest of your life. The same goes for real estate. Rather than tie up all of your money by paying off one house, you can use the same amount to put down a deposit to purchase five homes or businesses that you can rehab or rent at a profit, while paying off the remaining loan amount with money from the rent or sale. If the profit gained by utilizing the bank’s money is greater than the interest you are paying to use the money, you come out ahead. You can also utilize credit cards to build up your credit line and get points to reduce other expenses like airline travel. Just make sure you can always pay them off at the end of the month so you don’t waste money on interest.

      Get Out of Bad Debt

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      bad debt

        Think of your financial security like a bucket of water. In order to fill it up, you have to make sure you plug all the holes where it is leaking. Avoid the type of debt that has you paying interest on non-necessary items like the plague. When you carry this debt, you are making someone else richer while you stay poorer. If you already have this debt, make it a priority to pay it off as quickly as possible. Pay the highest-interest balances off first and make minimum payments on the rest of the cards. Then, when the worst offender is paid off, take the exact amount you were paying on the card you have paid off and roll it into the minimum payment of the next card. Continue doing this until you are out of bad debt.

        Revisit the Time = Money Concept

        Most people understand the thought process that when they give their time, they get a certain amount of money back. Unfortunately, there is a limit to this, as there is a limit to how much time you can give. The financially free people often learn to create multiple streams of income and get mailbox money. Think about someone who owns real estate. They do not put any time or effort into your rent check, they just collect the mailbox money every month for allowing you to live there. Or, think about when someone creates a new invention or writes a book. Even if they sell the product to others to market, if they are smart they will set up the contract to continue to collect royalties for the life of the invention. This is mailbox money. After the initial work launching or selling the product, they simply sit back and collect the checks. Or, consider those who invest in the stock market. Once they go through the up-front work to become educated on market trends and how to invest wisely, they put their money in a company and simply ride the market up or short-sell the market and make money as the market goes down. When you realize that you can make money beyond the typical hourly rate, your financial horizons expand exponentially. Most people feel intimidated by this initially. After all, this can push people outside of their comfort zone. But, this is where the truly rich play. They are no different that anyone else, they just learned to invest their time in educating themselves in these concepts.

        Follow a Budget and Set Aside Money for Saving and Investing

        Most people are shocked when they document where their money goes each month. There are so many online tools now that link with your bank account and help with budgeting. It makes it very easy to analyze your spending habits. Try to limit your purchases on frivolous items and learn to set aside a certain percent of your income for saving and investing. Take advantage of company-sponsored 401Ks, set up tax-sheltered retirement accounts, and learn about investing in the stock market or real estate. All of this can be done while still working your day job.

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        Budget Your Time Wisely

        Many people in America watch four or more hours of television per day. Now, if you’re watching the latest investment news, I will give you a pass. But, if your filling up that time with Honey Boo Boo episodes, then it’s time to revisit your priorities. I would challenge you to take just one hour per day you normally watch T. V. and read a book on investing. Or, start a business out of your home in the evening and enjoy additional tax breaks offered to business owners while making money on the side. Or, find other people who are financially free and ask them their advice. If you follow people who are successful, you find they are always learning and broadening their minds on new ways to improve their financial status. And, in my experience, they don’t mind giving advice or helping others along the way. Being rich is not a golden ticket only offered to the fortunate. While some wealth is certainly inherited, there are enough rags-to-riches stories out there to inspire us. It’s simply that few people are willing to change their lifestyle and achieve their financial dreams, because, frankly, it takes hard work and reality shows are just so much more intriguing.

        While this is not a get-rich-quick article, if you apply all of these concepts, you will find that you are well on your way to financial success, whatever your definition. With the right amount of passion, education, and hard work, anyone can achieve their financial dreams. Like most adventures, the length of time to get to the finish is different for everyone. But, like all great journeys, with each step taken, you are that much closer to freedom.

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        Sarah Hansen

        A corporate-sales professional turned entrepreneur

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        Last Updated on July 20, 2021

        Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

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        Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

        Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

        Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

        Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

        In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

        Break Free of Your Finances

        Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

        When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

        Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

        Though it seems hard to believe, it is really very simple to get financial freedom.

        To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

        While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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        Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

        1. Stop Unnecessary Spending

        We often spend money inwardly, instead of objectively.

        For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

        To stop this habitual spending, log down all your spending over the course of a month.

        Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

        This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

        2. Plan a Monthly Budget

        This is a great opportunity to get serious.

        Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

        Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

        3. Cut-up Credit Cards

        Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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        If not, you may want to consider ridding your life of the burden that credit cards bring.

        Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

        Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

        4. Increase Savings

        There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

        It’s good practice to save up to 15% of your income.

        Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

        Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

        5. Invest Wisely

        Consider investing in funds.

        Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

        To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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        Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

        6. Invest in Gold

        There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

        You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

        Another way to invest in gold is through ETFs (Exchange Traded Funds).

        These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

        With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

        7. Stash Emergency Funds

        Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

        If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

        Make it hard to get your cash.

        Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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        8. Find Fabulous Mentors

        Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

        If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

        There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

        9. Be Extra Patient

        Patience is the key of financial success.

        Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

        So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

        Financial Freedom for All

        Anyone can achieve financial freedom, regardless of their financial circumstance.

        Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

        Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

        Featured photo credit: rawpixel via unsplash.com

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        Reference

        [1] Hartford Gold Group: IRA Retirement Accounts

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