Most of us dream about financial freedom, but we may have a wrong concept regarding it. Many think achieving financial independence requires sacrificing, living a miser life, and depriving yourself. But, the truth is, while committing to financial independence requires making specific tradeoffs, you can reach it even after living a life of indulgence.
Today’s post is contributed by Amy Nickson, a passionate writer on finance. Amy N. is a professional blogger who has started her own blog Working Moms Word. Please share your opinions by commenting below.
How can you commit to financial independence without feeling deprived? Here you go:
- Know what you want, set a goal and prioritize it
To achieve something, you need to set a goal first. To prioritize the goal, you have to follow some strategies. Start by asking yourself what do you want, short-term happiness or long-term financial bliss? If you spend all the money you earn, you will have to work for a longer time. But, if you start setting aside a specific portion of your income from now onward, you can maximize your longer-term happiness. For me, working longer to pay for unnecessary stuff is the real sacrifice.
- You can save without depriving yourself
Saving is critical for you to achieve financial independence, for every dollar you are keeping today can help you attain financial freedom tomorrow.
Why is saving money difficult? The answer is, our impulsive nature pushes us to spend more money. Due to lifestyle inflation, peer pressure, social media influence, and TV advertisement, we have started thinking that spending money is more meaningful than saving.
Remember, spending money might give you happiness and positive feelings, but they won’t last long. Buying the latest technology or newest fashion trends is not the answer to how to be happy.
Saving money can be painful at first, but once you practice it, you’ll find it can be quite easy.
- Consider a lifestyle change
Considering a lifestyle change helps to save money. But it doesn’t mean you have to think a cheapskate’s lifestyle.
Living on less can make positive changes in your life; accept it.
You need to grow your money to live comfortably in your retirement. Because, when you retire, the cost of lifestyle may increase due to more travel or additional hobbies. You’ll need to be prepared financially to maintain the lifestyle you desire in retirement. And, remember, your health may not permit you to work for a long time. So, save as much money as you can as early as you can.
- Take baby steps to achieve your goal
People think budgeting is a difficult task. But the truth is, it is the simplest thing that helps you get to financial freedom easily.
Remember, financial independence is not only about taking retirement early. Living a debt free life is also a significant achievement.
At least try to live a less stressful financial life. If you’re spending more than your earning, then you need to stop it as soon as possible because this habit invites painful debts. Following a budget, can help you live within your means.
However, you can’t change your lifestyle and habit overnight. Take baby steps:
Review your past bills and credit card statements to understand where you spent the most.
- Reduce unnecessary costs
- Create a budget
- Set aside money to save
- Build an emergency fund
- Open a retirement account
- Reduce the cost of housing, transportation, and food
The Bureau of Labor Statistics reported that most of the people in our nation usually spend 70% of their income on housing, transportation, and food. But financial experts suggest that people should try to spend less on these most significant expenses. This will help you to put a considerable amount toward their FI goal (Financial independence).
Cutting down extra costs on housing, transportation, and food help you to save 30%-35% of your income. Though it may be difficult, it is not impossible to find those unnecessary costs and eliminate them to keep more money in your pocket.
How can you cut the costs?
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- Buy a smaller apartment instead of a big house. A small apartment or home does not mean you are sacrificing at all. If your family is not big, then no need to waste money on a large house. Maintaining a bigger house costs you more money. Consider a more modest home and pay off the mortgage as soon as possible. It will help you to concentrate on your financial freedom goal.
- Some people prefer to keep multiple cars for each of the family members. Spending money on cars is not a wise decision. Because, with time, the value of a vehicle decreases. In addition to this, you have to spend money on maintenance, insurance premiums, and gas. Try to cut down this cost; you will be able to save more. Keep one sensible car instead of spending thousands of dollar on luxurious vehicles.
- Reducing food costs can be less complicated. No, I am not telling you to starve. I would like to suggest that you stop buying items at the grocery unnecessarily. People often buy their groceries in bulk and end up discarding much of the things in the waste bin. Stop wasting food to save more. Eat homemade meals more often and spend less on restaurant bills. Eating at home is not living a miser life. Plan your meals, buy groceries, and cook whenever possible. Your wallet will thank you. Visit restaurants occasionally. By following these, you can easily save more money.
- Consider a side hustle
Only saving is not enough. Increase your income to fast-track the FI goal. Consider a side gig to boost your cash flow. For example, freelancing, pet sitting, putting ads on your car, building a website, announcing a garage sale, and starting a blog. With this great list of 125+ work from home jobs, you’re bound to find at least one you can do.
Instead of spending the extra income; set aside a small percentage of it to feel rewarded and then invest the rest of the money to get a good return.
- Stay on top of big goals with smaller goals and actions
Setting a big target (financial independence) and working on that can sometimes feel demotivating since you can’t always see the result quickly. To stay focused, you need to break your bigger goal into small action steps.
For example,
- Pay yourself first; after receiving the paycheck, your target should be to set aside a certain percentage. Automate your savings to ensure this happens, and you’ll start seeing results faster. Use an online compound interest calculator to see how your money can grow if you continue to save and invest it.
- If you love traveling and previously spent most of your income on expensive trips, then reconsider this habit. Try embarking on 2-3 budget-friendly shorter adventures instead of one or 2 costly trips. This will balance your expense and zeal for traveling.
Lastly, financial independence is a simple theory but can be difficult to achieve. But, if you think about it there was a time, we all struggled to walk and talk properly too.
It is all about the effort and consistency that make us perfect.
Start at your own measure, find ways to make more money, ask for a raise, save more, pay off debt, and take risks (investment), you will then surely achieve financial independence (FI).
Amy B.’s note – Thanks for the article today, Amy! Readers, Amy N., reminds us that we can make small and simple changes without feeling like we are depriving ourselves. As I wrote in a previous article, it’s about considering your values and selectively choosing what matters most to you today, what you want for tomorrow, and then earmarking your dollars appropriately.
So tell us, have you committed to financial independence or are you still afraid it’s too full of sacrifice?
Great post!
I think your first point is the most important in that it will help you not get distracted along your journey. If you have an idea of what you want in your life, then it’s easier to say “no” to outside factors that can deter you. Personally, me being young, most of my friends/colleagues go out a lot on the weekends to the bar scene. It would be fun to do this all the time, but our (fiancée and I) goal is to buy our starter home ASAP. This goal is weighted much heavier than the occasional immediate pleasure, so it is easier for us to stay committed.
Thanks for sharing!
I agree, Sean. When you have a target to work for it makes it much easier to say no to other things. Best of luck on achieving your goal for a home! (BTW when is the wedding?)
Great post!
#1 is critical, without a goal is like going on a road trip without a final destination, you could keep going forever!
Agreed! I’ve spun my wheels a few times in the past.
It’s a lifestyle, and there are so many paths to it. I’m a natural saver, and it’s been easy for me to grow my wealth, but it’s still important for me to keep focused.
Thanks for sharing Amy^2
True! That’s great, Erik. I wasn’t always a big saver, now it is very natural for me.
🙂
Financial independence is full of FREEDOM not sacrifice! One of the biggest things we’ve done was stick to our “starter” home that we bought at the bottom of the market. We have a kitchen, bathrooms, bedrooms, and a large yard. There’s nothing we’d get out of a larger house except extra cost. We’d rather use that money to travel and to paid our savings ?
Oh, I like that! I think that’s smart Angela. I’ve had the bigger homes and realized the extra cost and work didn’t make sense. I think you’re doing it right. 🙂
“Reduce the cost of housing, transportation, and food”
That’s the heart of it. Mainly the first two, houses and cars are what derail most people. Food can get too expensive but I’d argue that if you reduce the first two enough, you should spend what you need on good wholesome food because your health relies on it. Your health does not rely on a big house, and it’s impacted negatively by too much unnecessary car use.
Nice post!
Nice point, AF. In fact, my husband and I do just that. We’ve got the housing and transportation under control so we purchase great whole foods.
I agree that buying a smaller place and paying off the mortgage quickly is a great way to go. Our place isn’t small, but we did opt for a 15 year mortgage, and I’m oh-so-glad. We’ve paid down so much more principal than if we’d gotten a 30 year!
Yea for the 15-year mortgage! We refinanced to one almost two years ago. I just wish we had started with it.
Nice post, Amy N! “Saving money can be painful at first, but once you practice it, you’ll find it can be quite easy.” This makes me think of starting to exercise too. Once you can get yourself to the gym, the workout will happen and give you the “high” you want. I feel the same thing about saving. It’s work to get started – but boy does it feel good to see that money in your account!
That’s so true, Vicki – it’s work to get started but feels so good when you see the results – for both savings and exercise.
Very valuable points mentioned.Thanks for writing such articles.Nowadays most of them spend their money living luxurious life,this article teaches us how to manage them wisely,
Thanks
As always, I agree with you. It is actually healthier living. We are just giving up things that are not necessary to live a fulfilling life. We are using that money to buy our freedom instead.
Buying are freedom indeed. Thanks, Dave!