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Why you should aim for financial independence, even if you don't plan to retire early

Become financial independent

In order to attain financial independence, consider some of the below steps:

  • invest your money into different projects, stocks. activities: diversification is sometimes the safest key to success
  • do your research thoroughly before investing your money anywhere, to avoid unpleasant surprises
  • increase your income by finding side hustle or getting engaged in new projects
  • manage your income by cutting down unnecessary expenses
  • invest in real estate: rent or resell properties.

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Why you should aim for financial independence, even if you don't plan to retire early

Why you should aim for financial independence, even if you don't plan to retire early

https://thinksaveretire.com/financial-independence-without-retirement/

thinksaveretire.com

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Key Ideas

Financial Independence

Financial independence implies not having to worry about money anymore, but rather focus on what you want to do, in your free time and your passions.

However, being financially independent is not to be perceived as having an infinite amount of money, so you should not spend everything in one go.

Become financial independent

In order to attain financial independence, consider some of the below steps:

  • invest your money into different projects, stocks. activities: diversification is sometimes the safest key to success
  • do your research thoroughly before investing your money anywhere, to avoid unpleasant surprises
  • increase your income by finding side hustle or getting engaged in new projects
  • manage your income by cutting down unnecessary expenses
  • invest in real estate: rent or resell properties.

Attain financial independence earlier than later

In order to feel less stressed about your expenses, start doing the research on how to achieve financial independence now.

It will save you a lot of frustration that might emerge due to work while also making you feel more satisfied with your own life.

SIMILAR ARTICLES & IDEAS:

Financial planning

 ...is the process which provides you a framework for achieving your life goals in a systematic and planned way by avoiding shocks and surprises.

Try making a budget
  • Create a full inventory of expenses in front of you: Categorize them into fixed and variable; urgent and non-urgent; necessities and luxury; avoidable and unavoidable.
  • You can create a hierarchy of needs and decide which one’s to address first. It’s all about prioritizing. 
  • Accept that you have limited resources and unlimited wants. But you have to manage your resources. The sooner you accept this fact, the better you can control your impulses towards avoidable expenditures.
Maintain a personal balance sheet

It’s a statement wherein you can jot down your assets and liabilities.

  • Pull together your bank statements and other proofs of the liabilities
  • List down your assets like the bank balance, all investments, home value, and value of other assets.
  • Take a sum of all the assets to arrive at the total value of your assets.
  • List down your liabilities the (car loan, home loan, credit card balances etc.)
  • The sum of all the liabilities will show the value of the money you owe.
  • When you subtract the value of liabilities from assets, you get your Net Worth.

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How much you should save every month
How much you should save every month

The popular 50/30/20 rule states that you should reserve 50 percent of your budget for essentials like rent and food, 30 percent for discretionary spending, and 20 percent for savings.

But ...

Why 20 percent is recommended

Assuming you're in your 20s or 30s and can earn an average investment return of five percent a year, you'll need to save about 20 percent of your income so you can reach financial independence when you're older.

Financial independence means that you can maintain your chosen lifestyle entirely from the interest of your investments and dividends.

The four percent rule

The four percent rule states that you could withdraw four percent of your principal balance every year and live on this indefinitely. That means you need to save 25 times your annual expenses to become financially independent.

The four percent rule is not perfect. There is no risk-free investment that yields that much today. Sudden inflation could also cause a problem.

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What early retirement means
What early retirement means

Early retirement is not defined as when you stop working forever, but as having the freedom and flexibility that saving up enough money can give you if you want to leave a job.

...
How to retire early

A good early retirement strategy is built on maximizing three aspects: Income, expenses, and savings.

To build your early retirement strategy, you need to determine your retire early or financial independence (FI) number. It is the amount of money you need for work to become optional. Be aware that the number will (and should) change as you change, and your desired lifestyle evolves.

The money you need for early retirement

Based on a series of papers known as the Trinity Studies, you need to save 25-30 times your expected annual expenses to have enough money to last you for the rest of your life.

This multiple is based on the percentage of your investment growth that you would be able to withdraw per year. A safe early retirement withdrawal percentage is between 3%-4%.

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Real Estate Investment
Real Estate Investment

Real estate is filled with wins and losses. It is not a guaranteed profit game.

Before you make your first investment, consider if you are ready to risk facing something like a subprime m...

Beginner Investment

Although real estate can be intimidating for beginners, you can start your journey with a few easy methods.

  • Real Estate Investment Trusts: REITs enable you to buy shares in a company that works with income-producing real estate and earns high dividends.
  • House Hacking: It involves buying a property with multiple living units where you live in one and rent out the rest for income that can pay off the mortgage or pay for maintenance.
  • House Flipping: Buying cheap, underpriced homes, making renovations with as little as possible, and reselling it in the market for profit.
Risks Involved
  • The Unpredictability of The Market: There is never a guarantee that you will make a profit when you make a sale.
  • Credit Risk: When investing using leverage, the bank owns the property until you have paid the loan in full. If you are unable to pay your installments on time, you risk facing foreclosure.
  • Depreciation: Generally, real estate property will increase in value, but it is not guaranteed.
  • Negative Cash Flow: It is the result of a low occupancy rate due to bad tenants that cause destruction or irregular payments. Property with hidden structural problems could also cause problems.
  • Liquidity Risk: If you need cash quickly, you cannot rely on the money you invested in property. Real estate is a long-term investment.

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The Slow And The Fast Way To Build Wealth
  • The long-term approach to wealth building: If you’re younger and your income limits allow, open up a Roth IRA. Invest in mutual funds and ETFs while making sure you have enoug...
Todd Tresidder
Todd Tresidder

“Great wealth builders focus on both saving money and earning more.”

9 Ways To Building Wealth Fast
  1. Save on vehicles. Before buying a car, investigate vehicle reliability, pricing and financing.
  2. Rent. Most rentals offer more flexibility in case you need to move. Also, not having the mortgage payment allows you to start saving earlier.
  3. Don’t be a consumerist, buy only the things you really need.
  4. Save a percentage of your income so you have more money to invest.
  5. Work hard on your current work regardless of your feelings for it. It’s easier than finding a new great opportunity and may lead you into a promotion.
  6. Educate yourself even if it doesn’t bring any immediate benefit, being educated opens new opportunities on the long run.
  7. Invest in yourself and your marketing to open up new opportunities.
  8. Being an entrepreneur is the best way to maximize your earnings, short of being an investor. Try it, even if it fails the learning from it will be invaluable in your next attempt.
  9. Real estate won’t make you rich overnight, but it’s a solid strategy to increasing your network. 
Financial Literacy
Financial Literacy

While kids and teens get to learn about a lot of stuff, most families and schools do not teach them how to manage their money. In some families, it is considered a taboo subject and many friends a...

In And Out

Most of us know how much we make, but we need to pay close attention to how much money is actually coming in post-tax, and how much is going out.

You can start by writing down your Starbucks, Uber, Amazon, and take-out expenses, along with your car insurance, utility bills, subscriptions and memberships. Slowly we can realize that many of these small expenses add up to huge figures.

Review And Analyse

By noting down all your expenses on pen and paper, or on the PC excel sheet, you can start to review and analyse your spendings on a weekly or monthly basis. This will make you find innovative ways to save money, catching hold of ‘runaway spending’ that went unnoticed before.

Example: You could find that the $5 Smoothie that you had every day, could cost much less if you made it at home.

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Next Level Money
Next Level Money

Our desire to achieve next-level money or to master, control and optimize it, can only be fulfilled by us, and it goes beyond just earning, saving and investing money.

...

Automation Of Money

Automation of money will lead to a ‘coasting’ life, but it won’t get one to the next level. While we already know that the goal is to make money work for us, instead of slogging ourselves for earning it, it is not enough to simply save and let the money grow in banks.

One has to be aware of the pitfalls of wastage of money, be able to shun mindless consumerism, and embrace minimalism to move towards that level.

Pushing The Boundaries Of Security and Comfort

One cannot be complacent and run after security and comfort. Longing for a default, peaceful life of status quo will not put one on the track of next-level money.

One has to get to work, piercing the comfort zone bubble and the man-made boundaries that are around us.

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Common investment questions
Common investment questions

Two of the most common investment questions are "what do you invest in " and "what are the best investing strategies"?

The best investing strategies are...

Shady investment advice

Bad investing advice can come from many quarters, such as wealth expos or financial advisors. If anyone promises you any type of return over 12%, 99% of the time, they are probably playing you.

There are great financial advisors out there, but many people who sell investment products just want your money. However, it's not that hard to invest for yourself.

How to avoid bad investment advice
  1. Never buy a financial or investing product from someone you just met.
  2. Getting returns over 12% per year is ridiculously hard. If it sounds too good to be true, it is.
  3. If you don't understand it, don't invest in it.
  4. If one of your friends recommends an investment that's making them a lot of money, they are probably suckers too. If you see the "results not typical" on any marketing materials, move on.
  5. There are no "secrets of the super-wealthy" that anyone will sell you for $500 or that you can take advantage of unless you have hundreds of thousands of dollars.

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Robert Kiyosaki

“A person can be highly educated, professionally successful, and financially illiterate.”

Robert Kiyosaki
Financial Literacy Questions

A financially literate person should be able to answer these questions:

  • How much are they earning after tax and after saving for retirement? Is it fair considering their education level and job title?
  • Are they earning above sector median rates, below, or on par?
  • How much goes to their retirement accounts?
  • How much goes into their investments?
  • What are the rates of return on their investments when benchmarked against an index like the S&P 500?
  • What are their financial plans?
  • Can they read a company's financial statement?
  • Do they understand their tax benefits?
  • Do they understand their retirement requirements?
  • Do they have a plan for retiring?