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By Jade Anderson
Special to the Financial Independence Hub
Financial independence can mean different things to different people, but the widespread definition is to be financially secure and on the right track to a safe retirement.
Sometimes people will still need to work in order to maintain their financial independence (aka “Findependence”), but the main idea is that you are free from any debt or outside help from financial institutions. This may seem like something that is unachievable for anyone outside of retirement age, who isn’t well established; however, because of the different types of financial independence, it may not be so difficult after all. Adjusting your spending habits, creating a budget for your self and several other things can lead you towards Findependence, if you know the right things you need to consider.
Reduce unnecessary expenses
Setting up a budget for the long term is extremely important if you’re wanting to become financially independent. If you can cut down on any unnecessary expenses (such as extra food, clothing, and entertainment) in your weekly spending, then you’ll find it will be a lot easier to save. If you are not used to saving money, starting small is important because it will help you establish a pattern of saving properly, and it will be easier for you when you move up to saving more of your average income.
Plan your savings and spending
Planning not only your savings, but also your spending is crucial for ensuring your financial independence. If you have a few debts, and you can make plans to pay off certain amounts by certain dates, you’ll find that the overall debt is easier to pay off, than if you paid it off in a lump sum. Using one of the financial calculators like those on Brighter Finance can help you calculate your budget and repayment periods for your loans, so you can keep track of your money more easily.
Retirement saving plans are another good idea, especially if you’re getting closer to the traditional retirement age. Knowing exactly what you’ll need to retire comfortably gives you peace of mind once you reach your goal. If you can assess your investments early on, then you’ll have more of an idea of how much you will earn from them later on; then you can plan accordingly, rather than making an estimate now and assessing them later when you need to know.
Consider inflation
While you may think you have enough savings to last you for the rest of your life or at least for a while, people often forget to consider inflation rates when they decide how much money they will need to save. Living off of $40,000 a year today will be different than living off of $40,000 in 20 years, because the price of goods and services is constantly on the increase. So, although it may seem like a silly oversight to most people, make sure you consider inflation when making a financial plan for the next few years of your life.
Have a backup for your finances
Most people who decide to become financial independent (or “findependent”) will stop working because they don’t need the extra money to survive, and they decide that living below their means works for them.
However, some people may decide that they want to make a little extra money here or there, whilst still being financially independent and living off their accumulated savings.
Having a few little ways to make money if you need to is good to think about. Gumtree is a great way for people to make a little extra money by selling any items they no longer want or need. You can list anything you could possibly want on Gumtree, from homewares and clothing, to cars and houses, and you can reach a wider audience than you would selling your items through local vendors or at a market. Simply upload a photo, description, and a rough price that you would like to sell your item for, and then sit back and let the sales roll in.
If you have any doubts or queries, speaking to a financial professional is a good idea, because they can give you the advice you need to make the right decision for your financial situation. They may find ways for you to reach your goal of financial independence quicker than you may have before because of their knowledge of the financial world. Places like Ratecity are a great place to start, because they will give you advice on loans, superannuation funds, savings accounts and more, whilst comparing rates from many of Australia’s top lenders.
Being financially independent may not be for everyone, and there are some sacrifices involved with living like this, but having financial freedom is something most people would love to have and do whatever it takes to attain it.
Jade Anderson is an experienced In-house Editor at Upskilled. With a background in online marketing, Jade runs some successful websites of her own. Her passion for the education industry and content is displayed through the quality of work she offers.
