What does financial independence mean to you? I’ve been on a journey to improve my finances for a few years now and my ultimate goal is to become financially independent.

Financial independence occurs when you’re able to sustain your lifestyle and meet all your expenses without needing to work a job. It’s the ultimate level of freedom where you can spend your days as you please and working a job can be an option rather than a requirement.

I’m so grateful to live in a country where everyone has the opportunity to make this a reality no matter where you come from or what your past looks like.

So, how does someone become financially independent sooner rather than later? No, you don’t have to be super rich or make a ton of money. Here are 5 things I’m doing to work toward financial independence.

1. Paying Off Debt

Debt is one of the biggest financial obstacles that will only keep you from reaching all your other goals. Sometimes it feels good to spend money at the moment and inflate your lifestyle. If that involves accumulating debt, you’ll unfortunately be stuck paying for the stuff you bought for months or years to come.

People who are financially independent don’t carry a lot of debt, which is why you shouldn’t either if this is your end goal.

A few years ago, I decided I didn’t want to spend my money paying for my past and deal with ridiculous interest charges. I started paying off my debt quickly and changing my spending habits to avoid accumulating any more debt.

My husband and I paid off both of our cars, and my student loans are gone. Given the fact that the average car payment is $400/month, we’re saving a ton of money by eliminating this type of debt out of our lives. That money can be saved and help us reach financial independence sooner.

2. Keeping My Biggest Expenses Low

In order to become financially independent, you need to balance saving for the future and enjoying life now. Financial independence is several years away from me so I try to cut certain expenses and keep some so I can enjoy my life in the present.

For example, I’m not going to give up my urge to treat myself to a latte once or twice a week or go to a concert with friends.

However, I do try to keep some of my biggest expenses low because those make a bigger difference. We live in a modest home in an affordable area which keeps our housing expenses lower.

We do a lot of cooking at home, shop with coupons, use cash back programs, compare rates for insurance and buy things used. Buying big-ticket items used and utilizing discounts for everyday expenses allows us to free up more money to save without doing a ton of work.

3. Diversifying Investments

Becoming financially independent means I need to invest my money to grow it faster. Just stashing funds away in a savings account probably won’t work. Savings account rates are way too low. Investing in the market is risky, but you can average a 7% to 8% return thanks to compound interest over time.

I invest by contributing money to my Roth IRA and my husband has a 401(k). That’s not all we’re doing, though. I’m also opening a brokerage account with Vanguard and we’re investing with our Health Savings Account (HSA).

Real estate investing is also on my to-do list as we hope to rent out one of the rooms in our house and use the cash flow to help us buy an investment property.

We also opened an annuity, which is a fund that allows you to stash money away for retirement and receive a guaranteed return and monthly income during financial independence.

By diversifying our investments, we are making our financial future more secure. When I retire, I may need to pull money from my brokerage account and a percentage from rental properties, which is why it’s good not to keep all your eggs in one basket.

4. Saving 30% of My Income

Saving money is my key strategy, and I need to save lots of it. A general rule of thumb is to take the annual income you wish to live on during retirement years and multiply it by 25.

If you say you need $40,000 a year for example, you’ll need to have $1,000,000 in order to reach financial independence.

In order to reach that amount, you need to save aggressively. If you’re just saving 10% of your income, it will probably take you longer to get to your goal amount. If you save more, you can become financially independent sooner like in 10-20 years. Imagine being 45 and no longer having to work anymore.

Currently, I’m saving 30% of my income but I hope to start saving more. Aggressive savers going after financial independence often manage to save 50% of their income or more.

5. Earning More Money

In order to save more, you need to earn more as well. If you want to become financially independent and earn $20,000/yr, you’re not going to be able to save as much as someone who makes $50,000/yr.

With a higher income, you can drastically increase your savings rate. This is why I’ve been working hard to make more money and diversify my income.

Over the past 3 years, I’ve been able to triple what I was making before. I created a freelancing business, started monetizing my blog, and started working on some passive streams of income too.

If you can create your own side business, you could use the income to help fund your lifestyle once you become financially independent.

Remember, financial independence is not just an unattainable fantasy. Regular people like you and me can reach this goal too. All it takes is commitment, careful planning, and positioning yourself to save aggressively and simplify your lifestyle.

Have you ever thought about becoming financially independent? What are you doing to save more money?

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