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Article 7 steps to creating financial independence

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I don’t know about you, but I have been dreaming of having financial independence for years!

You know the one that pops into your head when you are thinking about winning the lotto? The problem with dreaming was that it never got me anywhere. In fact, at one stage in my life, I even felt like I was going backwards. This was around the time I had become a single mum. Even though I was building my career, which meant a better salary every year or so, but my bills were still constantly late.

This caused me so much pain that I started thinking about my ‘lotto dream’, and instead of dreaming this time, I considered what is it that is holding me back from bringing this dream to life now, apart from the fact that I was broke!

Get your mindset right

This is so important for your financial independence journey. If your head is not in the right space, it will be a struggle attracting money in your life, let alone creating wealth.

What I found out as I was studying money, is that we create our money beliefs by the age of seven, based on what we see around us. Which means that if you see that it takes hard work to get money, or hear that money is tight, or experience new things coming to you constantly, your habits will relate to these experiences.

So, first things first, check your beliefs about money. What do you identify with? Do you feel it is hard to come by? Do you think there isn’t enough?

If so, you will have to learn to turn these negative programs into a new positive pattern to support your financial independence plans, or you’ll find the journey a challenge.

Get really clear on what you want

As funny as it may seem, many people cannot actually verbalise what it is that they want. It is because we tend to put our needs aside a lot, especially once motherhood hits!

When was the last time you put yourself first? When you can reconnect with you, you can gain clarity in what you want. The more detail you can write down, the better. Think about the lifestyle you want, where you want to live, what you want to do, where do you want your kids to go to school, how many holidays a year do you want to have, what sort of job or business do you want to have?

Think about anything and everything and then add a monetary value to it. It can be in today’s dollars for now. That is a great starting point. It gives you an idea how much money you need to create for your financial independence.

Create a plan to get there

Now that you know what you want to achieve, you can create goals, targets and milestones along the way.

Achieving financial independence won’t happen overnight. So, you will have to take into consideration where you are at right now. Do you have debt you need to reduce right now? Do you have bad spending habits that you ill need to address? Do you have some assets that are draining the money pot that need to be addressed?

Then consider where you want to head, will that mean you need to increase your income, introduce another sort of income, learn to invest, create an investment plan, set up savings plans?

There will always be things along the way that will help you tweak the exact steps you need. You just need to select a direction for now.

Commit to your goal

This may mean some challenges, but your want to achieving your goals need to be stronger than any distractions may be. Without commitment to your financial independence, you will not get results. It will become the one step forward, two step back shuffle.

Personally, I found that wanting to create financial independence to be able to provide a better life to my children was an amazing motivator. What is your reason that will drive you forward?

Spend less than you earn and invest the difference

This is rule number one to creating financial independence. I am pretty sure it is common sense. The challenging part is investing it in the right assets.

I don’t necessarily mean whether you choose between shares or property. Right assets are the ones that you can understand and create a passive income. There is no point in investing in something that stresses you to the max! The health risks will outweigh the benefits. Also, if you don’t understand how it makes money, I would not go near it.

When you are investing, invest for the longer term. That is generally where the real growth is.

Get a team

Creating financial independence is a team sport! Your accountant can help you set your ventures up in the most tax effective ways. Your lawyers can help you protect your assets. Your brokers can give you assistance with your finances. Your planners can help you create your projections for growth, and the list goes on.

Find whoever is specialising in the asset classes you intend to use and work with them.

Get a mentor to keep you on track

Let’s face it, if we need to make things happen for ourselves, they tend to go into a too hard basket. When you have a mentor or coach, they can help you stay accountable, focused and on track to achieving your financial goals, as well as guide you to take the right actions for the outcome you desire.

Keep reviewing your goals

Whatever you measure gets improved. By continuing to check your progress, you can see what is working, where you are at and then adjust the plans to move your forward with better impact.

Creating financial independence has it’s challenges, but with a positive mindset, clear plan, strong commitment and focused action you too can achieve it!

Have you made yourself financially independent? Share with us in the comments.

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Comments

  • I plan as much as i can and have started adding additional items to my budget to save for. Spending less is a big thing but very hard to do, so this year i am trying to implement one small change and build it from there. I am terrible at buying coffees and lunches and feel this is the goal for me this year to try and cut out and save this money for a holiday that I really want to go on.

    Reply

  • Planning is essential and then working hard to achieve your goals. I always review my plans and goals and make readjustments.

    Reply

  • do this for your kids and they will learn by your example. great tips and great read

    Reply

  • Stop spending. people spend money on things they don’t need or can get cheaper if htey shop around.

    Reply

  • Take it easy people – it will come easier once you have aged a little.

    Reply

  • Once you get on in years, it seems easier to become financially independent. Give it time, people.

    Reply

  • My husband and I review our financial situation every year. We’ve just recently met with a Financial Planner to understand how we can best utilise our money now that we own our home. We’re always thinking about how we can look forward, enjoy living, but have enough for retirement.

    Reply

  • This is a goal for me this year after splitting from my ex. Funds are tight and some payments are irregular. The best thing I do is have an automatic bpay payment or bank transfer for things like electricity, rent, health insurance etc. I pay a set amount off by bills each fortnight (eg $50 for electricity) I also put $10 a fortnight into a high interest account, not a lot of money but its a start. By having all the bills come out on the same day as you are paid (or the day after) you know what you are then left with, I buy my groceries and fuel the car up after the payments come out, then what is left I can save more or use where needed.

    • The best advice I got that helped me get ahead is to pay myself first. Meaning that if it’s $10 you allocated to savings, it goes in to savings no questions asked. It’ll add up and compound nicely.

      • Compound interest – the discovery when young is an eye opener and an incentive too.

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  • Wise advice, thank you for sharing.

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  • 1. You need to know what your net pay packet is.
    2. You have mininum estimated cost of living expenses (board, rent or mortgage), utility charges, food, medical costs and any other definite necessities. Add 10% to allow for fluctuation of usage and price increases. If you have last years figures it makes it easier to do. If you have a separate figure for food I would add 12.5% as it definitely went up more than 10% last year. I don’t buy “gourmet” food items at all or it might have gone up more. If you consume alcohol or smoke tobacco at all you get 2 price hikes a year.
    3. Other unavoidable expenses. 4. Spending money for ememrgencies /small incidentals
    4. Basic Travel Expenses.
    Total your expenses. Deduct them from your income to calculate your savings.
    Before shopping always make a list. I sometimes buy extra items of those I buy all the time when they are on special. Hopefully they will come on special again before I run out.
    Other shopping: think about whether you actually need it or just want it. I’ve always found it a great achievement to save for things before I buy them…..in my case including my first car.
    If you take out loans, with the interest you often pay about 1.5 – 2 times the actual price of the items. Alway keep money in your normal bank account in case of a genuine emergency. Money in investments you always have to give notice that you need to withdraw it. You can incur penalties if you do so.

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  • I don’t like to risking my time i heat to loses

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  • Got thre – don’t need to worry any more.

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  • Good article and l agree spend less than you earn and invest or save!

    • Thank you! 🙂 I love looking at my investments as ‘savings’. These days don’t get too phased if the ‘savings account’ is running low if I can get a bigger bang for my buck elsewhere. It comes down to managing risks and returns.

    Reply

  • Very good advice. I agree with all the tips.

    Reply
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