Freedom. What does that word mean to you? How does it relate to money? You may be thinking “free to buy whatever I want,” but we want to aim for something more.
Financial independence gives you the freedom to live comfortably and confidently, in control of your time and lifestyle for the rest of your life — without relying on others. True financial independence makes working optional. But what is the path to get there?
The basic rules of smart spending are to spend less and save more, but you can ask yourself some questions to help create a more detailed plan.
Every dollar you spend today is a dollar you don’t have tomorrow. As you build for retirement think about your desired lifestyle, your hobbies, your vacation plans, your health. What opportunities are of highest value to you, and what unnecessary expenditures are you willing to cut out to get closer to financial independence? To help manage your spending, create a budget (check out Mint.com), write out your priorities and “wish list” of optional purchases, and monitor your spending monthly.
Evaluate your investment profile and calculate no more than a 4% withdrawal per year. Get the necessary insurance plans in place. Think through your recurring expenses, your discretionary spending, and your future family costs. Set up automatic monthly savings, 401(k) contributions, and monthly deposits to your emergency fund.
While there may be circumstances you simply can’t control (the stock market, inflation rates, unexpected life events), there is a lot you can do now to become the owner of your money and time.