Become Financialy Independent

Becoming financially independent is something that almost everybody dreams of. After all, who would not want to not have to worry about having enough money to pay for everything they need? Being less dependent on monthly salary and having enough savings to provide financial security for the future?

Financial freedom sure sounds great,  But what does it actually means to become financially independent? Is it even possible? and why most people seem to be stuck on the same loop of earning, spending, borrowing over and over again? 

What does real financial independence mean?

Obviously, different people have different needs, different goals, and different definitions of what freedom means for them but then again, not everybody is built the same and its quite ok as building your independence, and especially your financial independence is a pretty personal and individual goal, after all, your finances has to fit your life and your definition of freedom.

That being said, the concept in the heart of financial independence is actually pretty straightforward and can be summarised to a few basic principles:

when you are: in control of your finances, free of debteffectively manage your savings, and invest for the future you are well on your way to becoming financially independent.

The next step in becoming completely financially free is to completely stop relying on your salary/monthly income and to consolidate your assets to become permanent money machines that generate income for you on a regular basis, without the need for any major management by you. (which is what the rich call ‘real assets’).

Is it really possible to reach financial independence?

Five levels of financial independence

Financially dependent

This is when your expenses are greater than your income, and, therefore, you are in one way or another dependent on someone or something else to help you. This is the level at which all of us start out, and it is sometimes referred to as level zero — since someone who is financially dependent has no financial independence.

Financially solvent

Your income is just sufficient enough that you are able to meet your financial commitments without any outside help to cover regular expenses.

Financially stable

Once you are able to consistently meet your financial commitments on your own, the next step is to start saving. Financial stability is usually reached when you have built an emergency fund — but you have not yet begun saving for the longer term. You may also be carrying some debt, such as a student loan or mortgage.

Financially secure

Financial Security is achieved when your income can easily cover all basic living expenses, and beyond that would also allow you to stay afloat temporarily if necessary, for example, if you lost your job and had to look for a new one. Now is the time to rid yourself of any high-interest debts, so that you can begin to focus on building a solid investment base that will lead you to the next level.

Financially independent

At this point, you do not rely solely on your income to cover your expenses. You have made solid, long-term investments that are paying dividends that allow you to continue building your wealth. These investment earnings are enough to cover your desired lifestyle, whatever that is for you.