Financial independence is the most vital need in today’s world. With rising inflation, volatility in global markets and frequent policy changes in economies; people are looking at means to avoid debt and achieve financial independence.
Road to financial independence
It is said that “a journey of a thousand miles begins with a single step”. The best way to financial independence for any individual is by getting a job. It not only boosts your confidence but also gives a direction to your financial habits. While it is true that one should make hay while the sun shines but it is equally important not to forget the all important “Save for the rainy day”. You never know when any contingency arises and the saving habit developed over years can go a long way in helping you. Although, it may sound quite simple, but having a high income doesn’t automatically translate into higher net worth.
There are a plethora of factors which decide the road you tread on: Financial independence or debt.
It’s all a play of Income and Expenses
Your income standards do define your expenditure as well. Most people begin by staying in a rented accommodation. Planning to settle down and marrying results in the need for a bigger place. The next levels of expenses come from the needs when a child is born. Invariably, the expenses only rise with time reducing chances of saving.
Hence, while on one hand you may procure a loan for a neat home, it is essential to ensure that your debt quotient never surpasses your income. It is best to keep little savings separately for the retirement as well as insurance plans pertaining to children.
Live your life and enjoy a splendid Lifestyle
The way a person lives his life is greatly responsible for him being in debt or financially independent. It is easy to spend extravagantly on the purchase of a new car or take a luxurious vacation after working hard for some time. But there needs to be a conscious effort in ensuring that your lifestyle doesn’t bother you with too many debts later.
Your location matters
Suppose your domicile is a place where middle class people reside, the expenses are likely to be modest. On the other hand, staying in an up market area will result in more expenses as not only any items would be more costly but also the rent rates. It is alright if you earn a million dollars and have an extravagant car and live in a posh house, but it would be foolish to spend exorbitant amounts if your income is that of an average individual.
It is easy to assume that only the rich have a lifestyle which they can pay for. But, the other classes also get into cell phones, alcohol, new cars and other expenses which may not be necessary. Instant gratification is an alluring and dangerous concept as it gives a satisfaction then and there instead of investment which would go on for more than ten years. This makes people resort to a lifestyle which ends them up in debt.
The Bottom Line
The realization and the importance of financial independence are only realized by the current generation after getting neck deep in high debts which they may not be able to handle. You must look at few years down the line always and note how imperative it is to be financially independent as there may come a time when you can’t get support from anyone.
About the Author: Lauren Devaney is a financial adviser and suggests people to go for easy loans which enables cash paid in 15 minutes. You can visit her website and get tips on finance.