How To Declare Your Own Financial Independence Day

Independence from debt also entails freedom. Financial independence begins with a statement, just like the political independence we commemorate. Here's how to declare your own financial Independence Day and win it.

 

•    When you no longer need to work and can live the lifestyle you want, you are financially independent.

 

•    It is a good idea to start saving and investing early in order to reach financial independence.

 

•    Setting up and adhering to a long-term strategy is frequently necessary. 

 

To put it simply, financial independence may be described as having enough money to live well without having to work. In actuality, what various people define by financial independence varies.

 

For instance, 57% of respondents in a recent TD Ameritrade survey of young Americans aged 15 to 29 believed they were financially independent because they could meet their obligations without assistance from their parents, grandparents, or other family members.

 

There are other definitions of financial independence that fall between those two standards. Some people have no intention of ever leaving their jobs. They merely need enough money to live comfortably and to be able to deal with an emergency without incurring debt. 

 

Others see it as being able to support themselves and be there for family members who need them without worrying about being able to afford to help—or having enough to support the institutions and causes they value—and that freedom from worry includes the freedom to travel, spend time with family members, relax, and enjoy the "fruits of their labor." Many of these objectives could be included in your definition.

 

Whatever it is that you define as financial independence, it is likely that, barring a lottery win or a wealthy inheritance, it will only come to pass if you are prepared to work for it. 

 

The strategies we're going over can help you progress toward financial independence. But it's crucial to understand that caution and strategy only go so far. How free a person is to accumulate wealth and achieve financial independence is greatly influenced by factors such as family obligations, health, personal circumstances, and social privilege—or lack thereof. 

 

Knowing that the playing field in America has never been entirely level, this advice is offered in that spirit. It is important to commemorate the independence and freedom that were proclaimed on July 4 and won during the Revolutionary War. However, Americans must also acknowledge that the vast bulk of the populace of the new nation was left out, our country is still struggling to completely feel equal and free. 

 

There is no single method that will enable you to achieve financial freedom, just as there is no definitive definition of what constitutes financial independence. Nevertheless, all strategic plans share some characteristics. Set financial goals, decide on the resources—financial and non—you will need to achieve your objectives, choose the investment strategies and other strategies you will use, and commit to perseverance to keep fighting for your financial independence until (with a little luck and hard work) it is in your possession. 

 

Your financial goals are particular to you. Consider your long-term objectives. Do you desire complete financial freedom—the opportunity to do as you please without having to work for a living? Or do you have more modest goals? Are you comfortable living a largely independent lifestyle with the occasional need to increase your passive income?

 

Your choice of goals will be influenced by your age and financial position. You have decades to accomplish your ambitions and the freedom to take greater risks if you are in your 20s or 30s. You might even consider pursuing the FIRE (Financial Independence, Retire Early) approach at that age, which comprises intensive saving and investing practices intended to enable you to retire much earlier than usual. Your objective can also be to be able to pay your expenses on time and stay out of debt, as revealed by the poll respondents from TD Ameritrade.

 

If you are older, say between the ages of 50 and 65, you probably already have goals for saving for retirement, but even if you don't, you still have time to make financial independence plans. To make up for lost time, this may entail a riskier investment plan depending on your ambitions and collected assets. Or perhaps you need to redefine what comfort in retirement means. Whatever your goals are, make a note of them. Keep them in sight to serve as frequent reminders of your eventual goal—living a life of financial independence, according to your definition.

 

Which instruments (weapons) will you require to accomplish your goals? These could be any number of different income-generating assets, from savings accounts or certificates of deposit to a portfolio of dividend-paying stocks, bonds (or bond funds), and real estate.

 

The largest asset for many people is their property, which can be utilized as a source of wealth or as collateral for a reverse mortgage to assist finance retirement. And there are other ways to invest in real estate than that. Although they can entail a sizable investment and degree of risk, rental properties can produce enormous sums of cash flow. 

 

Another way to invest is through REITS (real estate investment trusts). The COVID-19 pandemic demonstrated how the value of real estate may fluctuate over a short period of time. But over the long run, real estate has shown to be a reliable source of income.

 

Starting and operating a profitable business with the eventual goal of either ceasing direct involvement in day-to-day management or selling the business for a sizable profit would be another asset for growing wealth.

 

Intangibles like knowledge and expertise are also considered assets. You weren't taught how to manage a small business, invest in real estate, or trade stocks when you were a baby. You were endowed with the capacity to acquire knowledge, conduct study, read, and test out various approaches to determine what works. 

 

Your choices will have a significant impact on how well you achieve financial freedom. To attain financial independence as you understand it, you need to become knowledgeable about and take action on these topics.

 

•    Start by creating a budget that allows you to pay your living expenses, allows you to save and invest, and takes into consideration your income and other resources. Consider your spending plan as a path to financial security. Pay attention to where your money is going and steer clear of pitfalls. Wherever possible, reduce expenses to open up more space for investing and saving.

 

•    If your workplace offers retirement savings plans, take full use of them. If not, make your own by opening an IRA or Roth IRA. On the other hand, it's crucial to make room for enjoyment (unless you are following the FIRE strategy above). Just be careful not to overdo it, and avoid borrowing for leisure above everything else.

 

•    In the same line, prepare for the unexpected by setting up an emergency fund that will provide you access to funds for unanticipated (but necessary) expenses when you most need them. Planning for unforeseen circumstances that can interfere with your plans is essential. It does not have to be a pandemic, it might also be a disease, an unforeseen job loss, or an economic disaster like the Great Recession from 2007 to 2009.

 

•    Finally, create an investing plan that leverages compound interest's strength. Compound interest accumulates over time and is free money. Gain as much knowledge as you can about investing, but also make use of what others already know. 

 

•    Find and work with an investment advisor as early in the process as you can if investing plays a significant role in your wealth goal.

 

Financial independence could also be equated with Thomas Jefferson's idea that the pursuit of liberty requires "eternal vigilance. “It takes a lifetime commitment to consistent budgeting and investing to reach financial independence.

 

Additionally, you need to be on the lookout for circumstances that can cause money to leak out that could be used more wisely. Or it can cause you to accrue more debt than you can manage. If you see it happening, force yourself to stop and pay attention. 

 

Then, attempt to find a solution, such as debt consolidation or debt counselling, or even the tried-and-true method of putting your credit cards away and not using them. Keep searching for fresh chances and innovative strategies to maximize your hard-earned money.

 

In order to keep your investment portfolio moving in the direction of your financial goals, perseverance also requires that you learn how to create a profitable investment portfolio and make sure to rebalance it frequently. Then, as you near retirement, make adjustments.

 

Success can sometimes surprise us. You might experience the same fate as the Continental Army following the British surrender at Yorktown on October 19, 1781, if your struggle for financial independence is tenacious and fierce. According to historians, the Americans had effectively attained independence at that point. But the conflict persisted for nearly two years until the Treaty of Paris was ratified on September 3, 1783, putting an end to it.

 

In other words, don't give up until you're positive you've accomplished the goals you set out to accomplish. Independence starts with a declaration, followed by a plan with goals, resources, strategies, and most importantly, tenacity, just as it did on July 4, 1776. Additionally, a little good fortune can't hurt. Additionally, be kind to your travelling partners. Nations and people alike require each other's assistance and company.