Three Basic Steps to Becoming Financially Independent

July 28th, 2007 | Stacey | Debt Management, Financial Freedom, Financial Independence

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Financial independence is fully achieved when your assets pay out enough passive income so you can afford your standard of living for an indefinite period of time. Most people never reach this level of financial freedom, even by the age of 65.

The 2006 Retirement Confidence Survey by the Employee Benefit Research Institute revealed that only a quarter of Americans feel “very confident” about their retirement security. Of that group, over a third have less than $50,000 put away.

You may want to become financially independent now but financial freedom takes some time. However, in 5 or 10 years you can be in the position you always dreamed of if you consider the following 3 steps:

First, define your standard of living and stick with a budget. You don’t have to spend a fortune to enjoy life and impressing friends or neighbors is irrelevant.

Second, earn a lot more than you spend. Ideally, you should earn twice what you spend. Clearly this can be difficult but not impossible. Never sell yourself short and always look for more ways to earn money and further yourself. When you earn more money, don’t be tempted to spend more.

Third, use your money wisely. Make your money work for you without taking ridiculous risks. Solid investment such as a business or real estate can yield ongoing income. Consider performance and risk when making investments and enlist assistance if necessary.

By making good decisions and having a solid common sense approach to your finances, you can achieve financial independence sooner than you think.