Do you want to become financially independent? Do you know how you can achieve this? Being financially independent means you have saved enough money. This amount is sufficient to support your current spending habits for the rest of your life.
Once you have reached financial independence, you won’t need to earn more money. Yes, you might work, but it will be for other reasons. For example, you might be passionate about a job. On the other hand, you might find another reason or purpose to pursue a career. However, you won’t need this job because of the salary.
In this article, you will learn more about the habits of financially independent people. So, make sure you keep on reading to see which of these qualities you possess. The best part is you can always change your current thinking and form a new habit.
Develop a Long-Term Thinking
Thinking long-term is an important characteristic that you have to develop. By thinking long-term, you will be more prepared for your future.
However, there are different types of long-term thinking.
Thinking about your future and pursuing a career
Let’s take lawyers or doctors, for example. They need to put in long hours just to get their degrees. After that, they need years of specialty training and higher education to get a paycheck.
Investing long-term means you will buy stocks, bonds, mutual funds, or other securities. The holding period is longer than one year. By investing long-term and creating a well-diversified portfolio, you can rely on additional income.
Practice Determination and Discipline For Financial Success
Determination and discipline will surely help you along your way to accumulating wealth and reaching financial independence.
Being determined will help you overcome all the problems and obstacles you might experience. On the other hand, being disciplined will help you develop the necessary skills and habits.
Assess Your Balance Sheet
To accumulate wealth and achieve financial independence, you need to have organic investments. These investments will help you generate passive income, dividends without labor, or capital gains.
Take a look at your current personal balance sheet. You might already have such type of investments. Remember, the more organic investments you own, the sooner you will reach your goal of financial independence.
Most Importantly: Grades Have Noting to do With Wealth and Financial Independence
You had poor grades in school and at university? Don’t worry. According to the extensive research by Thomas J. Stanley, Ph.D., author of “The Millionaire Next Door,” grades have nothing to do with wealth and financial independence. There is no correlation between economic wealth and success.
You don’t need a degree to become financially independent. In fact, almost 90 percent of American millionaires have undergraduate degrees. It is not necessary to have a degree from a prestige university. What you have learned is much more valuable. What you know and what you do at the moment to continue to enrich your knowledge.
The Six Stages of Financial Independence
Do you know who JD Roth is? He is one of the original personal finance bloggers. According to him, there are six stages of financial independence.
Stage 0: Dependence
You spend more money than you earn, and your lifestyle depends on others for financial support.
Stage 1: Solvency
You can pay for yourself but use consumer debt. Your income exceeds your expenses, but you are using the surplus to repay debt.
Stage 2: Stability
You don’t have consumer debt like credit cards and auto loans. However, you may still have college loans or a mortgage.
Stage 3: Agency
You’ve got enough savings to choose the work you prefer to do. You don’t have college loans or a mortgage.
Stage 4: Security
Your investment income covers basic needs.
Stage 5: Independence
Your investment income supports your current standard of living.
Stage 6: Abundance
You have enough money and then some. Your income starts funding new goals.
The Bottom Line
No matter what your current financial independence is, you can always start building a better future. If you want to earn more, you have to learn more.
You need to take responsibility for your financial future. The sooner you take action, the sooner you will become financially independent. And once your saving rate is high, you will have the power to do what you want in life and when you want.