3 Steps to Become Financially Independent

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Financial independenceFinancial independence is something everyone desires. The earlier we attain it the better. Most of you think that to attain financial freedom, all you need to do is just put in a more hours of work a week. That is not the case. Putting in more work alone, could not guarantee financial freedom to a person. You need to do much more than that to live a life of financial freedom and that too as soon as possible.

Actually, there are a few ways in which we can achieve financial independence. Though it sounds rather simple, these methods will help you achieve financial freedom in life

Step 1- Start Saving

The first step to financial freedom flows from your ability to save as much as possible from the income you get. Without developing a healthy habit of savings, you cannot enjoy financial freedom. If you are overspending and do not save, no amount of income is going to satisfy you. You will live a life of a pauper even if you are earning a 6-figure salary.

Life is hell for a person earning high income, if he has no plan to save. How much more will it affect someone who has only just started to work and is getting only fresher’s salary?

Make saving your second nature. If you are someone, who is only starting on in life then make sure you start saving as soon as you get your first salary. Don’t decide to start saving after a year or after getting married. Start saving from day one. Once saving becomes a part of your character, you would automatically find avenues to save money. It becomes programmed in your brain. Then, it really becomes fun for you to find ways to save money as much as possible.

Most of us are tempted to enjoy life during the first few years before we start saving. After all what is life without some fun? But that is a big mistake. Once you fall into an extravagant life style, then it is hard for you to adjust to simple living latter on. Therefore, it is wise if you start saving early on. It will help you to live below your means and when your salary increases you won’t be forced to raise your spending to match your salary hike. You will be able to save that much money.

Step 2 – Add More Income Sources

To be financially independent you need to continuously bring in revenues. Only this will ensure you financial freedom as soon as possible, especially when your present income is not much. If both husband and wife is working, always see to it that income from husband or wife goes into saving and take care of your expenditure from what you get from one jobs. If you are single or If you have any other talents like writing, drawing, music etc., then you could make an income out of it. You could write as a freelancer or sell your drawings etc. Those who have talent in a musical instrument can make extra bucks by teaching others. Turning your talent in to money helps you to bring in extra revenue and also a chance to pursue your passion

Step 3 – Invest Your Surplus

Money is idle and loses its value if it stays idle. So invest your savings in assets that gives you good returns. When you invest, do not go about investing in every high risk asset and definitely do not invest in something because someone just told you. Poor investment decisions is worse than not saving. This is because you stand to lose your money without getting any returns by foolish investment decisions.

The best way to invest is to invest in a portfolio, which contains assets that are high yielding but risky and in assets that gives low returns but are less risky. Make detailed research on these investments and invest wisely.

Do compounding when investing your savings. If you have a steady job, the only way you could make lots of money is by doing compounding investment. It means you must reinvest your returns from the investment. This helps you to increase the amount of money you invest and thus gives you higher returns.

These are often repeated words. You must realize that there are not short cuts to become financially free. You must struggle hard and follow the time tested ways that we have outlined here. For someone who is determined and has a will to succeed these methods is all that he needs to become financially independent at an young age.

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About the author

Amit is an Independent Financial Advisor, based in Dubai since 1997. He is part of the prestigious ‘Million Dollar Round Table’ (MDRT), which is an elite club of the best financial advisors worldwide.

He has authored the ‘6-Step Financial Success Guide’, and the book ‘Creating, Preserving, Distributing Wealth’.

He helps business owners and professionals ‘Create A Second Income’ through investments.

Amit Mitbawkar

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