Financial independence means having enough working capital to afford all your living expenses for the rest of your life, without depending on employment or a regular paycheck.
The FIRE (financial independence, retire early) movement has been gaining momentum in recent years as millennials in particular start saving vast sums for their futures.
But with the cost of living rising, and unprecedented increases in essential goods like electricity, gas, food, and petrol, financial independence can seem almost impossible. However, with a few tweaks to your current lifestyle and spending habits, you too can be well on your way to becoming financially independent.
Decide what kind of lifestyle you want
It’s estimated for a single person to enjoy a comfortable retirement, they’d need around $43,687 and around $27,902 of a modest lifestyle. Deciding on how you want to live in the future, will help you decide how much you need to start saving today.
If you currently own a home, will you sell that asset to help fund your lifestyle, or if you’re currently renting to you plan on buying? Whilst we might all have dreams of living a lavish lifestyle, with regular holidays to Bali and Thailand, the more extravagant your dreams, the harder you’ll have to work now.
Calculate how much you’ll need
Once you’ve done some thinking about your dream lifestyle, you can start to project what your expenses might be based on your current spending.
Look at old bank statements and add up all your costs. You’ll need to factor in inflation and decide at what age you want to become financially free. It’s best to estimate that you’ll live until you’re 100 to give you a bit of a buffer!
Now, it’s time to put your sums into practise. Knowing how much you need to save overall means you can break that down into smaller amounts. Setting up a direct debit every week for a small amount will mean you’re saving without feeling the pinch.
If your current expenses show you spend $100 a month on eating out, put that $100 in a savings account and go for a walk with friends instead. If buying clothes is your weakness, make sure you sell an item before purchasing anything, and if possible, buy second-hand.
Create an investment portfolio
Investing is one of the best ways to increase your income and CFD trading is one of the easiest methods if you don’t have the capital to invest in real estate. Contracts for Difference (CFD) investors speculate on the price of an asset, without having to physically invest in an asset.
If you’re serious about achieving financial independence, you should speak with a financial advisor who’ll be able to provide the best ways you can reach your goals.
Originally posted 2022-03-14 17:52:17.