Wealth can be measured in many different ways, but are you truly rich if you have to keep working to pay the bills? Financial independence is often the ultimate goal – to have sufficient money to give up regular work. But how can you gain financial independence? You don’t have to win the lottery, but you do need to have a plan.
Become Debt Free For Greater Financial Independence
1. The key to being financially independent is to be debt free. The sooner you do not have regular payments to make for a mortgage, loan or credit cards the better. Without these, you don’t actually need as much money each month to get by. But getting rid of debt requires deferred gratification. You need learn to put off buying things until you have the cash, you should make extra payments to your mortgage and have an emergency fund to pay for unexpected events. These are all very doable, they just require focus and discipline. Stop paying others with your hard-earned money; put together a plan to be debt free and stick to it.
Invest For Income
2. Invest your surplus cash in ways that create an income. One way to do this is to invest in funds that give regular dividends. You have to decide if you want to invest in high-risk funds, or lower risk ones, but you can slowly build a portfolio that can pay you sufficient money to live on. At first, it is a good idea to re-invest all dividends so that the funds snowball in size.
Live Off The Interest On Savings
3. You could simply save every penny of spare cash in a regular savings account and use the interest as your income. If you are very frugal, this could be achieved and is a relatively safe way to achieve your goal. According to The Telegraph you would have to save around £1.3 million in accounts that pay an achievable 2.25% interest to earn a salary of £30,000. Without a mortgage to pay, this could provide a comfortable living.
Invest In A Private Pension
4. To be financially independent after retirement, a private pension is usually needed as the state pension cannot be relied upon to cover all living expenses comfortably. Making an investment into a pension should be considered as early as possible to allow it time to grow. Research into the fees due and the kind of portfolios are on offer is advisable to make sure this important investment is sound. There a number of different providers specialising in digital investment interface offering advice and different options.
Use Property For A Monthly Income
5. Buying property and letting it would give you a monthly income. Purchasing the property outright with savings is the best way to make the most money, and research into the type of place that attracts the best rental in an area is needed. There are different ways to go, such as student lets, HMOs and holiday homes, but all, if purchased wisely, can give you a monthly payment even if you own just one property.