Being financially independent, what does that mean exactly?
Financial independence is the state where you have sufficient personal wealth to live. In this state, you don’t have to work actively for basic necessities.
Your assets generate more money than you need for those basic necessities.
It provides you a great sense of freedom. That’s why financial independence can also be called financial freedom.
Now that you understand what we mean by financial independence, we can talk about the crucial keys that will enable you to become financially free.
Let’s go:
1. Visualize your goal
Visualizing your goal will help you move toward it.
Like when driving a car, where you watch is where the car goes.
Picture your goal clearly.
Visualize your dream. Think about how your life will be when you have achieved your financial freedom.
What will you be able to do that you can’t do now?
How will you use your time?
What impact will you have on the world?
Think about all these things.
You always find what you’re looking for.
So have a clear picture of what you want.
That’s the way you’re going to move in the right direction.
2. Have a strong why
Having a strong why is what will make you move forward in the moments of doubt.
Knowing your why will help you find strength when you lose motivation.
So ask you why:
Why do you want to be financially free?
Is it to escape an unpleasant situation?
Is is to be free, quite simply?
Is it to have more time to spend with your family or with the people you love?
Is it to be able to focus on projects that really matter to you?
Take a few minutes to picture why you want to get financial independence.
Your why can change overtime. It’s normal.
What matters is simply having a why.
3. Plan
To move effectively toward your independence and freedom, you must have a plan.
You must draw a map of what will be your journey to this state of freedom.
An effective way to create this map is to list steps.
List the steps that will take you from your actual situation to your goal situation.
List as many steps as you can: it’s easier to climb small steps than to climb big steps.
Detail the different steps as much as you can. So that you know precisely what to do.
Think about it:
The best way to make a complex task easy to understand and to perform is to break it into smaller tasks.
A complex task is generally a group of smaller, simpler, tasks.
For instance, the task « stage an event for the birthday of my friend », can be split into smaller tasks:
- create a list of people I’m going to invite
- find a place where I can host the party
- set the time at which the party will begin and the time at which the party will end
- send an invitation to the people I’m inviting
- figure the food and beverages needed for the party
- buy the food and beverages needed for the party
- set up the place for the party
And we can divide these simpler tasks in tasks even simpler, to make the process even simpler.
You can use these tips to create a map to move toward your financial independence.
List all the steps you will have to follow to achieve your financial freedom, from the beginning to the end.
But don’t start before you have read the entire post, or you will miss essential points 😉
4. Create habits to move toward your goal
By setting the right habits, you will advance effectively and naturally toward your goal.
Thanks to key habits, you will be able to move toward your financial freedom effortlessly.
Habits are actions you take without even thinking about it.
They are actions you do naturally, almost effortlessly.
This is why crating habits that move you toward your goal is a very effective way to make constant progress:
You naturally do things daily or weekly that move you closer to your goal.
But how do you create habits to reach financial independence?
A great way to do this is to design a daily or a weekly tasks list, where you list actions you can do daily to build your financial freedom.
You will design this tasks list from the plan you designed previously:
Think about small tasks you can do daily (or weekly, or monthly) to take it to the next level, step by step.
Design a weekly schedule of actions you can take to progress toward your goal.
You do something on Monday, something on Tuesday (that can be the same thing as on Monday), on Wednesday, etc.
Over and over again.
After a while, you won’t even think about it. It will be completely natural.
You will perform these tasks like you brush your teeth.
Think about small actions you can do daily or weekly, instead of thinking about big punctual tasks.
You can also list some tasks you will do monthly, if it is best suited for some specific tasks.
5. Commit to constantly grow
If you commit to constantly grow, you will grow. Whether you grow slowly or quickly.
If you commit to take action each day to grow, you will grow day after day.
This is really important to understand. Many people stagnate in their life.
They are plenty satisfied with the situation they are in, and do nothing to change it.
On the other hand, you have some people who commit themselves to be constantly progressing, to be constantly improving themselves.
These people are the ones who achieve great things.
Because if you are determined to grow every day, at the end of the year you will have grown dramatically. Or at least you will have made huge progress towards you goal, which is financial freedom.
You can create growth quite easily by using a daily or weekly tasks list ; a tasks list that you will keep up with.
Think about the different areas or your life, and more especially the financial area: are you constantly growing in this field?
Do your assets grow month after month? Whether it’s the money in your bank account, placements, or real estate?
What about your income sources? Are you getting promoted in your job? Are you committing to take your business to the next level?
Commit to make constant progress in these fields, and you can be certain to achieve financial freedom one day (that can be closer than you think).
6. Always save money
Don’t systematically spend you whole salary on things that won’t help you achieve financial freedom.
Pay yourself first: when you get paid, take a percentage or a fixed amount of the amount of money you’ve been paid and put it in a safe place : a bank account, a safe placement, etc.
This way, you will create some assets that you’ll be able to make fructify in the future.
On the other hand, the people who systematically spend all the money they earn will still be at the same point in 2,3,4,5… years.
So pay yourself first: each time you get paid, put some of the money in a safe place, and use the rest only after you’ve spared some of it.
7. Build a safety net
The first thing you should do, even before thinking of investing, should be to build a safety net.
This is an amount of money you store in a safe place in case of financial issues (if you lose your job for example, or if your sales drop in your business).
Having this amount of money available will enable you take some distance. It will enable you to clear your mind more easily, and to think long term.
Try to save the equivalent of the money you need for one year of living.
For instance, if you need $1,000 per month to live, try to build a safety net of $12,000.
Once you have this safety net, you will have a greater vision. You won’t think about how you can live today, instead you will think about how you can get rich tomorrow.
When you have a safety net, you live with a mind at peace. You don’t have to cope with the stress other people need to cope to.
8. Put your money to work
It’s great to have some savings.
But it’s even greater to have some money that generates more money.
If you only have money in a bank account – cash – you’re likely to experience some loss over time.
Because of inflation, your money will lose its value over the course of time.
Instead, you can invest some of your money so that it gains value: these are placements where the value grows over time.
Shares, bonds, gold, real estate, and other assets…
By placing your money in such a way, you will experience gains that will move you toward your financial independence.
Placing your money is also a great way to protect your wealth (from inflation, for instance).
9. Take action
Take action. Work actively to generate more money and to make this money fructify.
Use the plan you created, as well as the tasks lists.
By taking action, you accelerate the way you’re generating wealth.
Why not start a business using some of your money to launch a company that will pay a high reward?
Why not invest some of your money in real estate and rent a flat or a house, to generate additional income every month?
Invest some of your money in shares that have the reputation for being quite safe.
Take action now. Stick to your plan.
10. Diversify your placements
There are two reasons to diversify your placements:
– Protect your wealth: if an asset loses its value, you’re not broke. You have other assets.
– Generate stable steady income over time: when you have a variety of placements, you’re income is steadier. That leads to more security. You’re relieved from the stress you could have if your income was generated by only one source.
Don’t put all your eggs in one basket.
Diversify your wealth:
- Shares
- Bonds
- Gold
- Cash
- Real estate
11. Stay out of debt
Beware of debt.
Avoid being indebted, because it prevents you from achieving your financial freedom.
The only reason to become indebted is to make an investment that will make you richer in the long term.
Anyway, try to pay your debts as quickly as you can.
Because your debts make your poorer.
12. Don’t spend your money, invest it
Do you know the difference between a spending and an investment?
When you spend money, you give it away.
When you invest money, you put it to work.
When you’re about to pay for something, ask yourself if it’s spending for an investment.
Will you have a return on investment?
Or is it just spending to satisfy a desire that you have?
For example, when you pay for ice-cream, you spend your money.
And when you use your money to buy some assets, you invest your money.
13. Get ideas from new people
Meeting people can help you achieve your independence, because people you meet can introduce you to new perspectives.
People you meet can give you ideas you wouldn’t have by yourself.
Several of my ideas resulted from discussions with other people.
But that’s not all…
Other people can open you to more opportunities.
You can meet people who have achieved your goals, and they can give some useful tips to move you closer to your financial freedom.
They can also share with you some moments of difficulty they had when they were trying to reach their goals.
14. Surround yourselves with successful people
« You’re the average of the five people you spend most time with. »
said Jim Rohn, a successful entrepreneur, author, and motivational speaker.
If you spend most of your time with successful people, you’re likely to become successful, like them.
On the other hand, if you spend most of your time with losers, you’re likely to become a loser.
Whether you want it or not, your state of mind is largely influenced by people you spend a lot of time with.
As well as your expectations and your ambition.
If you spend most of your time with successful people who have achieved all of your goals and even many other things you didn’t even think to attempt, your standard will rise.
Your goals will seem ridiculously simple to reach.
It will propell you toward success.
That’s why you must surround yourself with successful people.
Try to spend many hours each week with this kind of people.
It’s easier than you think: you can do it virtually, by watching videos of such people, or by reading books written by such people, or listening to podcasts recorded by such people.
15. Beware of taxes
It’s no secret that taxes can be overwhelming.
Over the course of years taxes can be quite harmful to your wealth. They can slow your progress dramatically.
That’s why you must do everything you can to optimize this key point.
Try to use laws that can help you pay less taxes. If you can, take advantage of government plans to get tax credits.
Invest your money in a way that you won’t have to pay a lot of taxes.