If you want to travel places, retire early, and spend quality time with your family, you need to become financially independent as early as possible. Becoming financially independent is a goal for many people. Today we will discuss the top 12 habits to help you become financially independent.
Building and increasing your net worth and staying out of debt are the initial actions you should take if you want to be financially independent. Especially if you plan to get early retirement, financial stability doesn’t come overnight. You must have patience and follow a brilliant plan or you can try and win it all at Springbok mobile casino.
Even if you have a good business or a job, you should actively seek and manage multiple passive income streams and money. The same advice applies if you want to retire early.
Here are 12 habits that will help you become financially independent.
1. Decide Your LifeStyle
Relax, close your eyes and do some daydreaming, and think, what would you do if you didn’t have to wake up every morning to go to work? How would you spend your time if you didn’t have to work to get a paycheck every week? What kind of house would you live in?
Before you go off the charts with your dream, remember that the more expensive the lifestyle you imagine, the harder it will be to get it going. The more minimalist your present is, the sooner you become financially independent and make that dream lifestyle come true.
Being minimalist means not spending on unnecessary things—only spending on really useful or the stuff you need. Live as simple as possible by saving as much as you can. This way, you can save the most at present and enjoy the most after your retirement.
2. Project Your Expected Expense
Calculate your current spending. You can easily get the current expenditure by recording a few months of credit card and bank statements. Now think about how these expenses will change for the new lifestyle you desire. How much will be your expenses then? After you figure that out, things will get much clearer from here on out. You can make this even easier by using a budget planner or tracker.
3. Set Life Goals
You have to be clear on what ‘financial independence” is to you. The general answer would be a dim sum of goals, so be specific. Be specific about how much money in back and asset will be your goal, your dream lifestyle, and at what age you want to achieve it. The more specific your life goals are, the higher the chance of acquiring them.
Write down all the specific goals you want to achieve. Now, compared with your current self, how much of a distance there is? Try to achieve financial milestones to reduce that distance bit by bit.
4. Make A Budget
Making a month-to-month household budget and adhering to it is ideal to ensure that all bills are paid, and reserve funds are on track. It is also a habit that will help you become financially independent by supporting your objectives and reinforcing your resolve against the impulse to go overboard on spending.
A. Managing Budget
Making a reasonable and practical budget is essential. What comes next is managing that budget. If you fail to manage a budget, there will be no point in making it. Here we will discuss three ways to manage a budget.
B. Reducing Living Expenses
The primary rule is to spend less than you make to become financially independent. You will have to give up bad habits that make you spend on unnecessary things. Cutting down over the top living expense can be a great habit.
Making a list before going grocery shopping can be a fantastic start. If you go shopping without a list, you may buy a lot more fancy stuff that you don’t need. You can spend less on housing if you move to an area with a lower living cost. Not spending on trendy fashion is another way to cut expenses.
C. Increase Income
If you don’t see yourself getting to a bright spot in your current company, you should explore better options. Even after cutting expenses, if you feel you’re still pretty tight on your paycheck, it is a sign you need to increase income.
You can do one or multiple side gigs. Freelancing, part-time job, and side hustles are great ways to make extra bucks. If you are good at teaching, you can tutor, cut grass, or rent your home or car. Building a side business is also an option.
5. Creating Passive Income
If you are doing your level best and still felling short on your paychecks or savings, then creating passive income is the boost you need. Building passive income streams can give you much more than you can expect. You can pull yourself from having hard time meeting bills to save more money than you planned.
Pat Flynn, CEO of the popular blog called smart passive income, said, “You need to start living a lifestyle in which you’re no longer trading time for money — you can create something valuable one time that people will continue to purchase.” But in reality, passive income requires knowledge, work, and patience.
If you decide to start an online business, generating passive income won’t happen in a day. It will take some time and dedication. But it will eventually put you on the path of passive income.
6. Start Investing Early
Your life can change direction at any point. You may get an excellent opportunity right off the blue. You may get in unexpected trouble, which may cost a lot of money. For reasons like these, you should always stay prepared. How do you stay prepared? By investing as early as possible.
Start investing while you are young and fresh. The earlier you start investing, the sooner you start making a reasonable sum of money. This money can be your backup if you mess up in life, or it can be your savings for your early retirement.
One common mistake young folks make is they think they have a lot of time and can start investing when they are older. Apart from all the reasons above, another crucial reason for early investment is compound interest. Never sleep on compound interest. It can be one of your life’s best decisions ever made.
For instance, CNN Money reports that assuming at the age of 25 to 35 you save $3,000 each year at a 7 percent yearly return, your initial $30,000 investment will develop to $338,000 by the retirement age of 65.
7. Diversify Your Investment
Nobody can provide a magical formula to you for investment. Even the best investors sometimes make wrong decisions. So the advice is to keep your investment as diversified as possible. Basically saying don’t keep all your eggs in one basket.
Based on your risk tolerance, keep your investments reasonably diversified.
8. Decrease Debt
Living with debt at your back is never a good thing. Many people get stressed out and face many mental illnesses because of debt. From a financial perspective, debt can be a negative trait.
Clearing credit card account balance, paying off mortgage and loans will help you increase your net worth. It would be best to try to pay off all the debt as soon as possible and not acquire any new debt. This habit will help you in the long run.
9. Creating Automatic Savings
Creating automatic savings can come real handy at a time in need. An emergency doesn’t come telling us; it may arrive at any time of our life. A sudden emergency requires money. Where will you get that money? From your automatic savings, of course. The prime purpose of this savings is so that you can withdraw it as an emergency fund.
Usually, the money should be deposited when you get your paycheck. So the money directly goes to savings; you don’t even get to touch it. Money directly going on savings instead of your hand is good. This way, you won’t be able to spend it for fun even if you have the temptation to do so. The recommended amount to save is highly debatable. Many people don’t do automatic savings at all.
10. Watch Your Credit
It would help if you acquired a habit of checking your credit at regular intervals. Your Credit score is essential. It determines what interest you will pay when buying a house or car. Even unrelated things like a life insurance premium and car insurance get affected by Credit scores.
The reasoning is quite interesting. It seems people with reckless financial habits are more likely to have a reckless life. Reckless as in driving and drinking. That is why you should check your credit card intervals regularly to keep your name clean.
11. Keep Learning
It would be best if you continuously educate yourself on matters that affect your wealth. Read all the applicable changes on tax every year to deduce everything correctly. Keep tabs on developments and financial news. Change your investment plan and portfolio accordingly. Remember, knowledge is the best defense you can have against the people who go after unsophisticated investors to turn a fast buck.
Today, many Americans feel hesitant to bargain or negotiate for services and goods. They worry that negotiation might make them seem cheap. This hesitance of bargaining can be identified as a cultural handicap. If you overcome this mentality, negotiation can save thousands of dollars each year. Negotiation can be included in small businesses, and repeat business can open the door to door good discount.
13. Proper Maintenance
Maintenance is an undeniable good habit for well being of your wealth. Taking good care of things from shoes, furniture, house to cars makes them last longer. The cost of maintenance is much less than the cost of replacement. That is why you should not miss out on investment in the maintenance of your property.
14. Get A Financial Advisor
This advice may not be for beginners. It is for people who accumulated a handsome amount of money to invest. Still, you can consult with a financial advisor to get started as a beginner.
Tangible assets or liquid investment takes some time to convert into cash. A professional financial advisor can advise and educate you on making splendid decisions.
15. Take Good Care of Your Health
The principle of taking care of property includes your health too. Your health is one of the most important assets to you. If you are not healthy, you won’t be able to work and make financial decisions to your best level. A healthy mind lives in a healthy body. Without a healthy mind, how can you expect to achieve your dream? You can solve many problems through lifestyle changes such as a healthier diet and regular exercise.
Not to mention if you face health problems you will have to spend quite some money on the hospital or doctor. We all know how expensive health care in America is.
These 15 habits might not solve all your financial problems, but they will surely help you become financially independent. These habits may seem easy, but unfortunately, many people fail to follow them. Either they get lazy or don’t understand the value it provides to their life. Try your best to stay consistent with these habits. Surely, you will achieve financial success in life.