Financial independence could appear to be a complicated concept.
However, it is true that anyone can achieve it.
Anyone who owes tens of thousands of dollars in bank loans is included.
Whatever financial challenges you are now experiencing, there is always a way out.
Everyone wants to be financially independent, however, most individuals appear to be having a difficult time achieving it.
It’s crucial to keep in mind that nothing happens by accident.
So the question becomes why do only a small percentage of people achieve financial independence?
Financial Freedom vs Financial Independence
There are several definitions of financial freedom and financial independence available.
The words ‘financial independence’ and ‘financial freedom’ are sometimes used interchangeably.
While there are some similarities between the two phrases, the intended meanings of the two terms vary significantly.
Here is our view on some critical distinctions between the two:
What Is Financial Freedom?
Financial freedom is a goal for the majority of people.
It often entails having enough savings, assets, and cash on hand to afford the lifestyle we want for ourselves and our families.
It entails amassing money that will allow us to retire or follow the job of our choice without being constrained by the need to earn a fixed wage each year.
Financial freedom means that our money works for us rather than against us.
Furthermore, financial freedom includes the capacity to purchase assets, begin an investment portfolio, or just indulge in luxury without incurring debt.
All of the expenditures can be covered by available cash or past savings.
Benefits Of Financial Freedom
- Less Stress / Greater Security
- Choose to Pursue Other Interests
- Control Over Your Time
- You Can Align Your Actions With Your Values
What Is Financial Independence?
Financial independence, by comparison, does not imply the absence of debts but rather the capacity to meet your present and future financial demands only via your source of income.
This might be your monthly pay, dividend income from investments, or profits from enterprises in which you have invested.
(Side note: If you are looking to take up investing, consider opting for reliable trading platforms like Trading 212 and Robinhood)
Other than this, a person with financial independence may have mortgages, auto loans, personal loans, and other debt commitments.
Still, they can easily cover all of them with their current wages.
The ability to live without relying on others for daily subsistence is a greater level of financial independence.
In other words, you will have the freedom to quit your job at any moment because you will not be working for money, but rather to fill your spare time or just as a challenge.
Being financially independent may also refer to the capacity to produce your source of income without relying on others, especially not on a monthly paycheck.
This is especially true for those who own their businesses.
Benefits Of Financial Independence
- You may live and work on your terms.
- Enhanced financial stability
- Unemployment insurance
- Early retirement with more investing power
- Peace of mind
What’s The Difference Between Financial Freedom And Financial Independence?
So we’ve established that there is not much difference between them.
Financial freedom entails being debt-free and financially stable.
You’re ready to deal with anything life throws at you without having to worry about living paycheck to paycheck.
Financial Independence simply elevates you to a higher level.
You exemplify living below your means and aspire to amass money.
You’re saving as much money as you can and investing or operating your own business.
One of the keys to financial independence is knowing what steps to take.
Here are a few key components:
- Visualize And Plan
- Consider Your Profession
- Income Generating Assets
Let’s take a look at each one in a little more detail.
As I stated earlier, investing is always a healthy practice.
When you start trading on an ecn trading platform, you have a consistent cash flow that allows you to live the life you want- providing you do your research.
Related article: The best stock trading articles in the uk
It’s important that you claim back any money you are owed.
Often, we find ourselves with money outstanding that could make a big difference to our personal finances if we were able to get them back.
This could be compensation from those who have wronged you, which can be recouped through no win no fee solicitors, or it could be outstanding invoices for freelance or contracted work.
Whatever is outstanding, make sure to claim it back. It will make a difference.
Visualizing And Planning
First, evaluate what your ideal version of a financially independent life might look like. Then, give yourself a reality check.
A qualified financial specialist can assess your existing financial situation, listen to your definition of financial independence, and assist you in developing a strategy.
The road to financial independence may look very different at 21 than it does at 50.
It’s preferable if you have more time to save and invest.
Begin with a realistic assessment of your options at any age.
When travelling, economic resourcefulness can make all the difference to your budget and enjoyment.
While planning your journey, weighing up costs and making smart choices are key – like considering barcelona luggage storage in airports to prevent costly baggage fees.
By taking advantage of these services on offer, you can save money while keeping your bags free from worry with secure facilities available 24/7.
If you are looking for a new road trip car, look at buying second hand cars.
Used vehicles are cheaper than brand new cars, and if you make sure to do your research before buying, you can guarantee that your vehicle is just as high quality as a new car would be.
Shopping around for adventure packages, transport tickets and sightseeing deals are all worthwhile investments too, so equip yourself with research tools like Tripadvisor and Google Maps to stay ahead of the game!
Consider Your Profession
Financial independence does not necessitate quitting a job you enjoy, but it is impossible to achieve without a continuous source of income to fund savings and investments that will grow over time.
Consider your current income, bonuses, and retirement condition first, and see if you can diversify your sources of generating income, such as part-time consultancy or stock trading on sites like Pepperstone.
Look at ways that you can improve your income in your current career such as training for higher positions through vocational courses or online nursing programs if you’re in the healthcare sector.
Invest In Income-Generating Assets
There are ups and downs in the markets for stocks, cash investments, collectables, and real estate.
However, conduct your research and concentrate on investments that were purchased at a good price and are expected to appreciate over time.
Also, remember to look into the tax implications of any investment you want to make.
Everyone wants to achieve financial freedom and independence.
Begin with controlling your money and spending, and then consider methods to diversify your revenue source.
There is no better joy than knowing you have complete control over your cash and that it is working hard for you.
Author: George Rossi
George is a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.