“I never want to be financially independent. I want to work way into my retirement, so I can earn to pay my mortgage,” said no one, ever.
There isn’t a person who does not want to be financially independent. But there is a huge difference between those who want to be and those who work to be. If you are unsure of who you are at the moment, ask yourself these four questions to determine if you are working toward financial independence;
1. Am I spending less than I make?
A lot of us believe the road to wealth is a ladder, which we climb up from high-paying job to higher-paying job. While it may seem like this is the perfect solution to all your financial problems, this road to riches doesn’t go much farther than your pay period, leaving you checking your calendar for your next paycheck.
Working towards financial independence means you need to start spending less than you make.
If you’d like to measure your level of wealth, ask yourself how long you can maintain your current lifestyle without any additional income. To put it bluntly; if you no longer had a job tomorrow, could you pursue the same things you’ve been putting your money into?
This first question is overlooked leaving many bewildered as to why a larger paycheck inevitably leaves them, still, with less.
2. Are you saving or investing?
If all this time, you thought that it was the same thing, here is what you need to know:
Saving, means to set aside for later. This should always be a practise when managing your finances as we have all encountered occasions where a sizeable sum of money would need to be easily accessible. Investing means to put the money into something for a longer period of time, growing the amount by a significant percentage. Savings accounts would have interest rates as well but in very minuscule percentages.
It would be important to note that investment would normally require a larger sum of money for your return to be life-changing, but with the proper guidance and research, this method of growing your wealth will be reaping huge returns in no time.
3. Am I building a foundation or relying on safety nets?
Taking out a loan is normal, but you should not mistake your loan for security.
When you “invest” too much in loans, things can become complicated, especially without the right financial advice. This is building on safety nets, and although they hold you up, they are not permanent or entirely safe. A safety net is meant to catch you, during an emergency, but if you build your finances on them, you may find sooner or later, that they have become all tangled up; your payments are all over the place, you borrowed more than you could return at a time, your loan has gotten more expensive over economical changes – the list could go on.
Building the proper foundation for growing your wealth may mean that you need to start reevaluating your expenses and spending less. It will take more time to create a cash flow management plan fit for you where you can focus on growing your investments, applying for the right loans, while still being able to save. But rather than temporary safety nets, why not focus on a solid foundation that you can build upon?
Most people talk about how they want to be financially independent, however, their actions and lifestyle would show otherwise. Why not start putting your money where your mouth is? If you are looking to maximise your wealth and start making smarter decisions with your money, book a complimentary financial kickstart session with us, and we will help you create a foundation for building your wealth without causing you to sacrifice quality of life.
Content is general in nature and not personal advice, you should seek professional advice before implementing any changes to your financial situation, we offer an initial complementary meeting to discuss your situation and outcomes you are after. Click here to learn more.