Whether or not the concept of financial independence is a term frequently used in your vocabulary, we’re willing to bet it’s not too far from the mind of most adults. At some point, most people would like to have the peace of mind that their financial obligations are completely covered by assets and income for the rest of their lives. Different people can define financial independence in their own unique way, but most commonly it is known for the flexibility to stop working (or stop work and pick up a passion project) while still covering living expenses.
After retiring from their career some may consider a new job opportunity to do something they love, others will embark on charitable endeavors, and a large group will stay busy with hobbies. Each person has a distinct path, but everyone must continue to cover expenses through their lives.
Over the next two weeks we’ll explore how to reach financial independence depending on life stage and believe there are 6 fundamentals that can significantly impact the probability of success.
- Create a financial plan with written goals: Having a plan and actually writing down the goal and definition of what financial independence means to you is imperative. It’s somewhat cheesy to include this quote from Pablo Picasso, but please indulge me for a second, “Our goals can only be reached through the vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.”
- Choose your lifestyle: this will determine many of the variables and assumptions needed to calculate your financial independence number
- Dominate Debt: understand good debt vs. bad debt and how it fits into your plan
- Consider Cash Flow: Spend less than you make. Strategize increasing income and decreasing unnecessary expenses.
- Saving and Investing: Yes, the two are different and the latter has a huge impact the sooner you start.
- Tax Planning: Strategies can be applied for many different scenarios to take advantage of certain tax laws.
Our next two articles will dive deeper into these six fundamentals and how they play a role in achieving financial independence for people of different ages.
Please let us know how we can help develop a plan reach your financial independence.
Matt and Andrew