Financial independence is something that everyone wants and you too can gain it in 2015 by following the suggestions here in this article. It doesn’t take being a genius to gain financial freedom; it’s something just about anyone can do if they go about it the right way.
The road to financial freedom should be started as early as possible and you must keep at it and be diligent about earning your independence as early in life as possible. It’s much simpler to do this beginning earlier in life than to wait until your much older, although you may still become financially free regardless of your age.
Financial Freedom Depends On Spending, Not Saving Money
Believe it or not, the ability to reach financial independence has less to do with the amount of money you save and more to the amount of money that you spend or invest wisely. It also depends on how much money you plan to spend in the future and what you expect to need to maintain your desired lifestyle.
There is an easy formula that will let you know the amount of money you need to reach this level and also how close you are to being there at this moment in your life.
Start With Reviewing Your Spending Habits
To begin your trek towards achieving true financial freedom, you must start tracking the amount of money that you spend every month. You need to get together all of the records for your spending for the month such as your checkbook and credit card statements. If you use an expense tracking computer program it will make this job a lot easier.
Subtract Retirement And Other Income
After adding these all up, subtract the amount of any retirement monies you expect to get such as social security payments or a retirement pension payment, if any. Also include any other sources of income you expect to get after you retire.
After this is done, you must multiply the amount left by 200. Whatever is left is the amount of money that you will have to have in all of your savings, investments, or retirement funds so you can both reach financial independency and retire in comfort at the lifestyle you desire.
Formula For Retirement Money Needed
If you would rather determine the amount of money that you are likely to need to retire in comfort at the desired lifestyle by using a mathematical formula, then you can use this formula to determine the amount you need: Monthly Spending – Expected Monthly S.S./Pension) x 200 = Target Retirement.
For example, if you have monthly expenditures that equal $4,000 every month and you are expecting to get $1,500 every month in Social Security retirement or dividend investment payments, your net essential liquid assets will equal $2,500 x 200, or a grand total of $500,000. That may seem like a large amount of money to have on hand, but there are ways to make sure that you are able to reach your goal of gaining retiring in style.
Will You Be Prepared?
One of the key things to becomgin financially free is to be aware of your spending habits and net worth early on in your working career. If you try to wait when you have already retired, it could be too late to achieve it.
However, if your personal net worth isn’t exactly at the point you need it to be, you may not need to panic yet. Instead, look over that list of financial obligations you determined earlier and see if there are any things that you can remove from your list. For instance, do you really need that premium cable TV package with hundreds of channels?
If you get rid of the luxuries you don’t really need, then you can pay off your financial obligations faster and that will help you to achieve financial self-sufficiency a lot quicker in life and be able to live the life you want when you reach retirement age.
Check Jobs For Possible Retirement Plans Being Offered
Also, another way to get that retirement money to the point where you can be free is to take a look at your retirement plans. If you don’t already have a pension plan or some sort of investment plan like an IRA, 401k or other type of investment retirement plan in place, then you should likely get one going fast.
It’s quite possible that your job offers some sort of pre-tax retirement plan that can get you on the road to becoming financially free. Plus, this will also lower your tax bracket in the meantime since you will be depositing money into pre-tax plans and won’t have to pay taxes on it until you withdraw the money at a later date.
What About Your Children’s Plans For The Future?
Once you are on the road to becoming finacnially free, you can be a mentor to your kids and help them start their own future plans early in life so they will be ready. All of us want the best for our kids and if they see us doing all the right things to help us to earn financial independence then they too will learn that it’s the best thing to do if they want to be comfortable in their old age.
Lessons learned early in life are the best as they help us to learn things that become habits and it’s simpler than trying to get our finances in order and earn financial independence when we are close to retirement age.
The bottom line is that it is not impossible to gain financial independence if you work hard and keep monitoring your expenditures, income level and make sure that you have a viable retirement, pension or investment plan to look forward to when you reach retirement age.