Morning! Today I am having Anton who is going to talk about Financial Independence. Anton Ivanov is an aspiring financial writer, a successful investor and a zealous entrepreneur. He is extremely passionate about helping others become financially independent and shares his financial knowledge at Financessful. You can follow his updates on Twitter, Facebook or RSS.
You hear the term financial independence quite a bit these days. It often comes up in conversations, is frequently mentioned by the media and can be found in abundance online. That’s not a surprise – financial independence is a much sought-after goal. Often synonymous with retirement, it can be considered the pinnacle achievement of one’s professional life.
But financial independence is a vague and very personal concept – we all define it a little differently, if at all. Some have a pretty good idea about what it means to be financially free. Others have only a vague understanding. I wanted to share with you what it means to me and why I think so many struggle to achieve financial independence.
Financial Independence is the Freedom of Choice
Most working adults don’t have the freedom to get up in the morning and say – “I don’t feel like going to work today, so I will spend the day with my family instead.” Sure, there are weekends, sick days and vacations, but the vast majority of people depend of their job for income. They need this income for food, shelter, medicine and other basic necessities. They also depend on it for recreation and entertainment.
The majority of people simply cannot afford to quit their jobs. They continue trading their time for money decade after decade. And if they have poor spending habits and don’t fully understand the importance of saving and investing, they may become slaves to their job until they die.
What Does Financial Independence Really Mean?
Financial independence breaks this enslavement and gives you the power of choice to do whatever you want every single day. If you want to go to work – you can. If you feel like taking the day off to go to the beach – no problem. If you want to go to South America for a month-long vacation – you don’t have to wait a day to do so. And if you don’t feel like working another hour of your life – that’s entirely possible as well.
When you have passion at your job, you have the opportunity and the money to afford the lifestyle of your dreams.
The Freedom of Choice Has a Price
Of course, becoming financially independent is easier said than done. To have the freedom to do anything you want in life without working, you need income to replace your salary and sustain your lifestyle. This income is usually derived from income-generating assets such as bonds, dividend stocks, rental properties or savings accounts.
Your entire life can be divided into two unique parts – the working phase and the retirement phase. During the working phase your goal is to maximize your income and purchase and nourish as many assets as possible to build your wealth. Then, during the retirement phase, you can use the acquired assets to generate income and support your lifestyle.
Out of all the obstacles that can prevent a person from reaching financial independence, two of the most common ones are the lack of good financial habits and a poor ability to maximize one’s income.
Ignoring the Basics Will Get You Nowhere
So many people struggle with a lack of financial common sense. They keep telling themselves how they want to retire early, yet they live paycheck to paycheck without saving a dime. They want to “move up in life”, but have no wealth to show for decades of work. They take 2 jobs to bring home additional income, but spend it all on the latest gadgets and are hopelessly in debt.
Money isn’t a terribly difficult subject. If you make and follow a budget, eliminate unnecessary spending, live a debt-free lifestyle and save and invest as much as possible, you can reach any financial goal you set your mind to. It takes only a little bit of daily effort to build good financial habits, but they will serve you for a lifetime.
A big part of the problem is the lack of financial education in today’s schools. Many grow up with absolutely no practical knowledge about money. But it doesn’t have to stay that way. There are plenty of awesome finance books containing a wealth of knowledge. The internet is filled with excellent sources of financial information – you are reading one of them right now. So if you feel like your financial illiteracy is getting in the way, you can’t blame anyone but yourself.
Maximizing Your Income
Many may disagree, but I firmly believe that business ownership is the best way to generate a lot of income and quickly build wealth. Jobs that can match a successful small business’s income are few and far between. And it may take you more than a decade to finish the required schooling and work your way up the corporate latter. A business can be grown much quicker, if done correctly.
I don’t think that you should immediately quit your 9-5 job after reading this, but I think that everyone, regardless of their occupation, education or abilities can develop a profitable business. There are numerous stories of self-made business millionaires that come from the humblest of backgrounds.
Most people are stopped by fear. They fear leaving their job, losing a secure income source and not being able to sustain their materialistic lifestyle. They fear starting a business because they are afraid to fail and think that there is nothing they can offer that others would buy.
But if you are able to see past your fears, you will see a world of opportunities. Opportunities that can all lead to your financial independence.
How do you define financial independence? What stops you from becoming financially free within the next 5-10 years?