Financial independence can mean different things to everyone. A recent survey carried out indicated that 44 percent of adults feel that financial independence means not having any debt, 26 percent said it means having an emergency savings fund, and 10 percent link financial independence with being able to retire early.
I define financial independence as the time in life when my assets produce enough income to cover a comfortable lifestyle. At that point, working a day job will be optional.
But what about you? How would you define financial independence? If freedom from debt is what you’re seeking, here are some areas that could be holding you back.
Not having clear, financial goals
If you’re not planning for financial independence, chances are you won’t reach it. The future is full of unknowns, but having an idea of when you’d like to achieve financial freedom should be your first step.
Do you want to retire before you turn 65? Do you want to travel the world with your spouse once you reach early retirement? Both goals will require a significant amount of cash stashed away, so it’s important to start saving early to make those dreams come true.
Not saving enough
It’s important to identify how much you’re currently saving, and how much you need to save in order to retire when you want to, or reach another major financial goal. Doing this can help you plan and prepare for various money-saving scenarios and make realistic projections about retirement.
Giving into lifestyle creep
A high income does not automatically make you wealthy. As you move up in your career, the temptation to upgrade your lifestyle to match your income. However, if you continue to spend and live modestly, you can put more money away for travel or retirement with every pay raise you earn. Financial freedom will be just around the corner if you resist that temptation to upgrade your home, car, and electronics to match your income bracket.
Being driven by FOMO
Fear Of Missing Out, aka FOMO, is the modern version of keeping up with the Joneses. Except now you have access to the Joneses’ social media platforms, and they go on all kinds of fun adventures. Social media is a great tool for keeping in touch, but it can also make you want to spend all your money on lavish vacations, clothes, spa treatments, and other extravagent things. Resist that urge. And block the Joneses on social media if needed.