There are many reasons that people choose to become financially independent at some point in their lives. Achieving financial independence means not relying on others for money and time.
There are benefits such as being able to do your own thing, choosing when and how much you work and having more choices to make in life. Many of the steps listed below can be accomplished with a little effort, while others may take years to achieve, but they are all attainable with dedication and hard work.
How Do You Become Financially Independent?
The steps below can be followed on your own, or you can join a group of people who are also striving for financial freedom (also known as “financial independence”). Many groups, such as the FIRE Movement, are organized around a core philosophy that provides guidance and support to members.
- Step 1: Discover Your Unique Value and Work to Protect It
You are a unique human being, and your finances should be unique too. There is only one person who can create wealth and you. That person is YOU. Anything completed with consistency and passion will eventually see success come. If you want to become financially independent, begin finding out what motivates you most and figure out a way to ensure that you’re putting your money toward something that drives your passions and earns an income.
- Step2: Avoid Debt and Create an Emergency Fund
Much of the time, people get into a financial mess – and then throw themselves into debt to salvage the situation or reverse the damage. Avoid this trap by setting aside at least 10-20% of your income every month in an emergency fund. You can use this money to repair the damage done by neglecting your finances or meet real emergencies such as broken computers, car troubles, or medical expenses.
There’s nothing wrong with taking out a loan, even if it’s through hard money lenders, but you need to have a good reason to get the loan and a solid plan to pay it back.
- Step 3: Build Passive Income Streams
There are many ways to build passive income streams, but they all rely on a successful business.
A great business model is one that allows you to create cash flow without having to put up much capital. Many times, it is just a matter of building your customer base over time by providing a better product or service than your competitors.
- Step 4: Automate Your Finances and Save Money on Fees
The less time you have to worry about money, the better. Automation makes your life easier and allows you to spend more time doing the things that are most valuable to you. Make sure that every bill is paid automatically and build a good credit score while you’re at it.
- Step 5: Increase Your Skills and Increase Your Income
Training yourself gets expensive in time and money, but it’s worth it in the end if it helps get you to financial independence faster. Skills are the way to do this, and they usually take time to master. Read books on topics that will help you be more knowledgeable in your field and make connections with people who can help you get better at what you do. Take classes or workshops to master the skills that will help you do your job the best. The better you are at your job, the better your salary could become.