How long are you planning to work? Although the standard age for retirement is 65, are you planning on working till then? If yes, you have to ask yourself what good comes with it. On the other hand, if you are wondering how to attain early financial independence, you are reading the right piece of information that’ll help you attain it.
Before diving deep, one must understand that living from paycheck to paycheck is never a healthy practice. There might be instances where you will have to go overboard and spend. In such instances, you won’t have any funds left with you. Well, this might be the most basic hardship one could face without financial planning.
Not seeing the bigger picture will make you not live a luxurious life down the line. And it’ll push you to work for a living all your life. So, in order to be financially sound, you need to incorporate a plan.
Here are the 5 rules for early financial independence:
- Money makes money is a fallacy
Most of the big investors or entrepreneurs started from the ground up. They first started small or literally from zero and tried to constantly compound the money over time. Like the famous Drake song quote, “Started from the bottom, now we’re here.”
- Create a passive source of income
If you are a working professional, you just can’t simply expect to grow your money just by saving a part of it. If you take the example of any successful person, they all possess one common trait. Having multiple sources of income. Now is the time to think about how else you could make money.
- Don’t underestimate the power of compounding
Compounding is all about consistency. If you start early i.e. at 25, in about 15 years you will be able to accumulate a decent maturity amount. Ideally one should understand the knack of investing in evergreen assets and also understand where to take a calculated risk. Consistency = Compounding.
- Spend on what’s necessary and not on luxury
You can earn thousands of dollars and still not become independent if you don’t invest it effectively. It is ideal to follow the 2:1:1 rule, spend 2 parts on needs, 1 part on wants, and save the rest. But what actually happens is people spend 2 parts on their wants and 2 parts on their needs leaving them with nothing to save or invest with.
- Track your spending to explore investment opportunities
We all spend money on an everyday basis and in the midst of chaos, we tend to forget our spending habits. It is advisable to have a spends tracking application on your mobile. Constant and consistent scrutiny of your spending will enable you to understand if you could invest more.
These 5 rules relatE to the FIRE movement from the book “Your Money or Your Life”
So, what is the FIRE movement? Financial Independence, Retire Early! It simply encourages people to devote themselves to a program of extreme savings and investment that aims to allow them to retire far earlier than traditional budgets and retirement plans would permit.
The core ideology behind the book is simple, the authors ask us to visualize the money we earn in exchange for the time we spend. And ask the question, “Am I earning enough for the amount of time I put in?”
In conclusion, you have to realize that timing is a key factor. One has to be very vigilant of the investment opportunities that may arise. Because saving is not the only thing that’s going to lead you toward financial independence. Start saving today and get a consistent 10% return on your investment with Fello Flo.