What Does It Mean to Be Financially Independent?
Many people wonder what it means to be financially independent. There are so many stories today of individuals varying in age and demographic who have become financially independent. But what exactly does that term mean?
Financial independence encompasses specific criteria. However, for many, financial independence is the key to genuinely becoming free from time constraints, income constraints, and even further giving back to the world around them.
In this article, we will discuss what financial independence means and what it means to be financially independent. Once you learn what this means, I guarantee you’ll also want to be financially independent soon.
What is the Definition of Financial Independence?
The definition of financial independence is when you have the option to retire early if you so choose to because you have complete control over your life, in both time and money. This is ideally seen as the optimal situation for many individuals to see success financially within their business.
Becoming financially independent means truly achieving a significant achievement and being able to say what your days look like from that point forward. It is a lot of things, but most importantly, it is freeing for you to finally achieve this and know that you have made it. Here are a few ways you can tell you are now financially independent.
Possessing Enough Income to Cover Basic Living Expenses
Having enough income to cover all of your bills, including some miscellaneous spending, means that you are financially independent. Most individuals who can achieve this typically have a budget that is not too lean but allows them to have a little bit of fun money. In addition, most people got to financial independence by following the 50/30/20 rule. This means they have 50% of their income for needs, 30% for wants, and 20% for their financial goals. It is a great way to live and one that allows you a lot of flexibility!
Confident About the Future
Another significant way individuals can tell when they’re financially free is because they know they are prepared for the future. This means they not only have the basic living expenses they need for a set amount of time, but they also have a surplus of investments and travel budgets that they can use in their wildest dreams. They are not only sure of themselves, but they are confident in their financial position and don’t have to worry about the next year, maybe even longer than that.
Even though many financially independent people end up saving a lot before they reach this point, they still are able to prepare for their ideal life after financial independence. Many of these people can travel worldwide, invest in specific projects, and continue building their wealth once they are economically free. Many even have a portfolio they invest in regularly, making them even more prepared for what lies ahead. No matter what, financially free individuals are confident and secure in their financial situation.
No Longer Working a Conventional Job
One of the most visible reasons you will see that indicates you are financially independent is that you no longer need to work your day job. Many people who become financially independent find themselves in a position where they now see that they can take back their time and don’t need the income they once had at their job. Many of them quit once they have reached this point.
Now, if you enjoy your job, you could continue to work there, but the basis is that once you’re financially independent, you don’t need to work if you don’t want to. Most financially independent individuals either have investments that create passive income or have a form of business that allows them to afford much of their expenses. Most of the time, financially free folk have found a way to make money while they are sleeping.
Regaining Control Over Your Time
One of the sweetest deals involving financial independence is that once you become financially independent, you finally earn your time back. No more going to the office 40 to 50 hours a week. Now, it’s time to think about your passions. Financially independent people finally get the chance to spend their time how they wish.
If you have earned yourself a position where you choose what to do with your time, and you’re not working anymore, then you’re financially independent. This is a fantastic place to be, and for many economically independent people, they say that it’s the beginning of the rest of their lives. Looking at all the possibilities, it is a whole brand-new chapter of prosperity!
How Do I Become Financially Independent?
Now that you’ve probably been thinking about financial independence, I wouldn’t blame you if you want to achieve it as well! There are many ways to be able to accomplish this for yourself. I hope that everybody does consider doing this for themselves. Not only would this help you live your best life but think about the legacy you would leave behind for your children and what lessons you could teach them along the way.
Here are some common ideas that people have tried and succeeded with on the path to financial independence:
Real estate investment
Increased 401(k) investments
Saving most of their income
Living beneath their means
There are many steps to gaining financial independence. You must find a way to make money other than your conventional job. There is a variety of ways to go about this, but whatever you do, focus on creating something of value, and you will always succeed.
Pave Your Financially Independent Future Today
I hope all these tips allowed you to see what it means to be financially independent and hopefully it motivated you to achieve it for yourself. For more information about finances and to prepare yourself for the next steps of your life, feel free to read more tips and tricks for financial health and independence on my blog. If you’re lucky and plan, you and your family can retire early and become financially independent.