Everyone craves a life with no hesitance for financial constraints. We all need a life wherein we can happily take our major life decisions without having to worry too much about the dos and don'ts of the situation.
But too often we are bound in the trap of life. From being a student to starting a job and then paying back money to our creditors ( for example bank, student loans, car loans), etc.
While this is also important, our passion gets diminished somewhere in this noise. But fortunately, you can choose to live your life differently. Here is why being financially independent is important and why it is needed to be pursued.
What is financial independence?
Financial independence refers to a situation where an individual has enough income, money, or funds to sustain his life without ever working for anyone.
What most of us do in our lifetime is passive working which means working for someone. Financial independence is about the money you make to live your life in a certain manner and has no worries about your financial stability. It does not necessarily mean that you must have a mansion, crores in the bank, or a boat.
Look at your numbers right now and you will get a clear picture. How much money are you able to save in your 9 to 5 job? Is your expenditure more than your savings? Are you able to expand your wealth? The most possible answer would be no. But what if you were able to find a way to sustain life the way you want and not completely rely on your employer for his check every last day of the month, then you have achieved financial independence.
No longer in the rat race
We don't want to be a part of long working hours with no job satisfaction. Some people manage to make the best out of their lives and have an early retirement at the age of 50. This idea excites me the most. But we cannot eliminate work from our life decisions.
Being financially independent does not necessarily mean not working. Financial independence means working for something that you like. A financially independent person knows his goals and insights and can pursue opportunities that may be risky.
Financial independence brings fun
When was the last time you had time for yourself? Happiness can't be bought by fun certainly can be. And that's what we are talking about here. When we are stuck in a 9 to 5 job we tend to invest so much of our lives in bringing in the money that we fail to spend even a small amount on ourselves. We have not seen our parents taking a single day out of their lives to just have fun. Financial independence can prevent you from living a life like that.
But one thing that has to be kept in mind is that fun is not proportional to the amount of money you spend. It can be attained by spending a small sum also. The takeaway here is that financial independence gives you the freedom to make those decisions for yourself.
Choose work that suits you
Most of the wealthy people that work for themselves usually take up on things that suit them. Being financially independent gives you the power to take jobs that gives you a competitive advantage over others. That is because you have more time to spend on your strengths and skills.
There has been a steep rise in working models such as freelancing, distribution, writing, real estate, graphic design, etc. Just because you lose one thing doesn't mean you can't choose another. Take what suits you so that you can change it into an earning medium without anybody forcing you for it.
How to be financially independent
We have talked about how imperative being financially independent is for someone. What are the reasons for someone to leave their job security and start living life on their own? Now we will talk about why we need to pursue it.
Financial independence refers to a state where people have ample resources at their disposal to meet their regular financial needs and to invest for future purposes. But what is financial independence? Is it the monotonous 9 to 5 work? We all study, graduate, and then give our lives to a single job. Amid this tiring work and hustle, are we focusing on becoming financially independent? When we are fixed on a monthly salary to meet our daily needs, can that be called becoming financially independent?
The financial ecosystem is changing rapidly. This is not something to procrastinate about.
Here are some steps to achieve financial independence early-:
Save and invest-: reduce your discretionary expenses, and start saving. This can be easily done by saving at least 20 % of your monthly earnings. More savings will increase your compounds, which should not be underestimated. Invest religiously to enjoy annual appreciation.
Invest in equity-: equity investment has shown great results in a very short period, unlike other investment avenues. If one starts at an early age, then the chances of wealth creation, return on investments, and achieving financial freedom at a very young age.
Start planning for your goals-: have a pre-planned goal strategy for every stage of your life for example- (marriage, health, education). Do proper research and make informed decisions about your life. Prepare an action plan for different scenarios and act accordingly.
Manage risk- Risks are inevitable. Have liquid funds to manage contingencies and short-term requirements. The plan is to not get adversely affected by any hard-hitting reality. For example, the coronavirus pandemic taught us that nothing is permanent. Economies around the world are hit vehemently with no pre-warning.
Keep track and record -: try to stick to your plan, and monitor every aspect of it. We often start our planning in a haste and that could result in problems later in life. Keep a check on all your spending and savings. Review your portfolio and make decisions properly.
Summing up
Financial independence is not only about creating wealth but building a life that you wanted for yourself and your generation ahead. What is the difference between a financially independent and dependent person? You know that a millionaire will invest 15% of his or her savings despite the turbulent nature of the market. Taking risks. Risk-taking is a synonym for wealth-making. If you are not able to take risks you might get stuck in your daily 9 to 5 job. Is that really what you need? Think!!
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