Financial independence is a wonderful thing. However, it tends to have a different meaning for for different people.
For one person, financial independence might mean being able to buy every imaginable luxury. For another, it might mean nothing more than simply having the funds to pay the monthly bills and have a little extra for pleasure.
What financial independence means to you means nothing to the rest of the world. But even if you live on the most lean budget, it’s entirely possible you could still live on less and save more.
One of the most common misconceptions is that a budget means nothing is left over. This is simply not true. Here’s how a proper budget should work.
Create a spending record
The simplest way to see where your money goes is to write it down. This doesn’t mean making a careless list that includes your mortgage and your utility bills. This means making a list of every single dollar you spend at every single venue over the course of a month.
At the end of the month, you will have a tangible sense of what you waste your extra funds on. This provides you with the ability to cut out unnecessary items and save a bit more. For example, if you spend $30 at the supermarket four times a week — unrelated to your weekly grocery budget — you need to stop that.
Perhaps you could make it a rule that if you forget something, you will simply wait it out until the end of the week when it’s time to make your next scheduled shopping trip. Or keep a small stash of cash and use only that to pick up forgotten items or extras. When you run out of cash, you make no more stops.
Where to put your extra money
When you find a loophole in your budget that allows you to save more money, what do you do with it? The answer is simple, if you haven’t any debt: you save it. However, if you do carry debt, your job is to pay off your debts and make your arrival at the gates of financial freedom that much closer.
One common misconception the world has about eliminating debt is that they should eliminate the smallest debts first. This is only true if the smallest debts carry the highest interest rates. Otherwise, your strategy should be to start with the debts that have the highest interest rates.
When you budget for a month and find your extra income, pass it on toward debt payments. Once those are paid in full, begin placing extra funds in your savings account.
Contribute heavily toward retirement
If your employer matches your contributions to retirement, make sure you take advantage of this. One of the smartest things you can do is accept that free money toward your retirement and not think twice.
Often, your employer will match a percentage of your contributions, perhaps as much as 100 percent. However, even if your employer will not match your contributions at that level, the more you contribute, the more your employer will put in. This equates to more free money.
There are a number of ways you can increase your income and become more financially savvy. One is to become a trader. By investing in stocks you can turn the money you have into more than you ever dreamed you could have.
There is always a way for you to reach your own version of financial freedom, even if it involves counting pennies and avoiding excess coffee stops during the week. Your money is your money; take risks or play it safe because it’s ultimately up to you.