Financial Independence: Start With Your Savings Goal


The following is a guest post. Enjoy! 

How to Work Toward Financial Independence
Financial independence is the ultimate goal of saving money. Being financially independent is defined as having enough money at your disposal so that you don’t have to work to pay for basic necessities. In other words, your investments and savings accounts bring in enough money for you to maintain your current lifestyle.
It’s important to note that being financially independent is not the same as being rich. Instead, think of it as having the right amount of money; not necessarily an excessive amount of money. It takes financial discipline and smart decisions to achieve financial independence.
You should consult with a financial planner to see which approach might make sense for your situation, but consider these three basic steps to get you moving toward financial independence.

1. Get serious about your savings goal

The key to financial independence is building wealth. To do that, you need to save more than you spend. If you’ve been lackadaisical about saving up until now, it’s time to assert your financial discipline and start saving regularly. Here are some ideas to get you started:
  • Set up an automatic savings account transfer to move a set percentage of your take-home pay into savings each month.
  • Set short-term and long-term savings goals with dates and dollar amounts to keep yourself on track.
  • When you save money on a purchase, move the difference into savings.
  • Transfer found money, bonuses, and commissions into savings.

2. Make sound financial investment decisions

After having accumulated a substantial sum in your savings accounts, you may be ready to look at long-term investments, whether they are stocks, bonds, mutual funds, real estate, investment groups, or other opportunities. These types of investments typically have much higher rates of return than traditional savings accounts. Of course, they also come with higher risks, which is why you should first consult a professional advisor and bear in mind their long-term nature.

3. Always look for the best interest rates

Whether it’s for your daily savings account or your stock portfolio, keep your eyes open for accounts that provide the best return on your investment. Staying on top of this can help you to build wealth more efficiently. It’s important to note that moving your funds from their current account may come with a fee, but that may be worth it if the ultimate return on the new account is substantial. Be sure to crunch the numbers to see if it’s a smart move or not.
Of course, achieving financial independence will take years and an understanding not only of your investments, but also of the market forces, tax codes, and myriad of other factors. Working with a savvy financial planner can help you get a handle on all that is involved. But, you can start making smart decisions today by starting to use savings accounts to build wealth and reach your financial goals.

How about you all? In your opinion, what is the first step towards becoming financially independent? Is this first step also the most important step, or is there another more important step further down the road that you need to overcome?

Share your experiences by commenting below!

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