How to Be Financially Independent

Everyone dreams of becoming financially independent as early as possible. I mean, who doesn’t dream of retiring in their 40s, moving to an island, and just hanging out by the beach every day, right? If you want to abandon your corporate life and live the island (or insert future retirement place life here) as soon as possible, then you have to make wise financial choices early on. Trust us, it’s possible!

But first – what is financial independence?

In the very simplest definition, to be financially independent means that your assets (or your investments) generate more than your expenses. Meaning you don’t ever have to work in order to survive. You can choose to work (for personal growth or to mentor someone else) but you do not need to do it for the money. 

Sounds like the perfect life, doesn’t it? But, how do you get there?

How to be financially independent at 20 

For you to reach your goals of financial independence, you need to start as early as possible. Many people make the mistake of thinking that their 20s are the time to be young, wild, and reckless with their lives. Well, if you want that beach house in Siargao by 40, you won’t get there by spending every weekend partying in your 20s.

Start by setting budgets for yourself that you have to stick to. No cheating! List down all your “must expenses” for the month (rent, food, utilities, bills, debt, etc) and subtract this from how much you make each month. Make sure you put at least 20% of whatever is leftover in a savings account that you promise to never touch. Whatever is left after that, you can enjoy! Just because you’re saving doesn’t mean you have to deprive yourself. You’ve worked hard, after all.

If you do shop or go on trips, try to avoid charging them to your credit card. Credit cards make it easy for us to lose track of our expenses, plus there’s that dreaded interest rate you have to worry about. If you’re eyeing a big-ticket item like a vacation or a new designer bag, it’s better to just save up for it than charge it to your credit card.

How to be financially independent at 30 

If you’ve followed our tips above, you’re bound to have saved quite a significant amount by your 30s. Congratulations! Now it’s time to grow your savings. The common mistake people make is leaving savings in a bank account thinking this is the best way to make it grow. The thing is, it’s not enough to just save in a bank account – the inflation rates and fees will slowly eat away your savings. If you want to get rich and be financially independent, you’ll want to invest that money wisely.

A stable investment is putting your money towards insurance. Life insurance grows your savings while ensuring your family is taken care of should anything bad happen to you. A financial advisor will also help you grow your savings the best way possible, so you can reach your financial goals sooner.

How to stay financially independent at 40 

What’s the similarity between Oprah, Barack Obama, Warren Buffet, and Bill Gates? They never stop learning, so neither should you. Even if you’re very close to your financial goals, keep learning about financial independence and investing. The world is constantly evolving so there’s always something new to learn – exciting, isn’t it! Listen to podcasts, watch YouTube videos, read books. There are so many options out there. The more you know about financial independence and investing, the better you will be at reaching financial independence AND maintaining your financial independence.