Financial independence seems, to many people, like something that’s only within reach for people who are already wealthy. Wealth certainly doesn’t hurt. The more money you have, the more money you can save, at least in theory. But this isn’t the only way that people can become financially independent.
This all hinges on one key point: most people waste lots of money. Even people who count themselves among the middle or lower classes, there are still ways in which money is not used to its most efficient ends. Of course, life intervenes, and some people have more financially difficult situations than for others. But these scenarios tend to come together over years and decades. For relatively young people, it is usually possible to order life in such a way that financial independence (or at least strong security) should be possible within a normal lifetime.
But to get there, you’ve really got to make the most of your money. This requires you to pay close attention to the money you spend everyday, the money you spend on a regular basis, and money which is taken away from you without your direct control. Let’s look at each of these.
Money You Spend Everyday. This is the most obvious one. If you waste money on expensive food, entertainment, and possessions on a regular basis, you won’t have any money to save and financial independence won’t be an option. For people without lots of income, frugality is imperative if wealth is ever to be attained.
Money You Spend Regularly. This includes bills you pay for utilities, medical care, insurance, internet, phone bills, and the like. Take the time to research alternative providers of these services, and you’ll save hundreds of dollars a year, every year. You should do the same for the way you shop at the grocery store, and the kind of car you pay to drive. Most people can save thousands a year of these sorts of expenses if they really work to make it happen. That would be enough to max out your IRA, if you used all of that money for that purpose.
Money That is Taken Away From You Without Your Direct Control. There is still other money that is taken without your direct knowledge or control. This may be drawn away from you because your credit score is low, causing you to pay more to borrow money than a person with a high credit score. If you continue to pay this extra premium for the duration of your life, you’ll be much poorer than if you had access to that money and were able to use it for a profitable purpose. Another example is PPI, or payment protection insurance. Many people in the UK were signed up for PPI payments without their knowledge, because the agreements were buried in complex loan documents. If you are wondering “Have I Got PPI?” It’s easy enough to find out. But without knowing that it is a thing that you need to look for, you’d be likely to pay it indefinitely. It’s important to examine your financial accounts regularly, to find payments which you may be making without your knowledge.