5 steps to financial independence

Financial independence; a goal for most Australians, yet for many, so elusive. Whilst plenty of people aim for stable finances, a much smaller proportion will actually achieve it. It’s a worrying thought yet, we’re lucky enough to live in a relatively sturdy economy with a supportive government that allows most Aussies to live a pleasant middle of the road lifestyle.

The downfall comes in the after-work years, with a financially viable retirement becoming an increasingly harder position to reach. Many people will be faced with having to live their later years with the financial constriction of just a pension. This is simply not enough to enjoy the years that should be filled with excitement and freedom.

Try living the life you want on a pension pay check that’s likely far lower than working life earnings. It certainly doesn’t sound very appealing and is focused simply on surviving when you should be living. If you want to do something about it, then getting a head start before retirement is the way to go!
Here are five critical steps to take to achieve financial independence sourced from a great article by Michael Yardney ‘5 critical steps to financial independence.’

Commit to the journey
  • Don’t be scared of the process to reach financial success.
  • Don’t be afraid of putting in hard work and dedication to achieve your goals.
  • Few people make the commitment to improve their financial future because they are fearful of what’s involved.
  • Go in with an optimistic attitude.
  • Face the fear, because if you don’t try you will never know what you could have achieved.

Create a plan
  • Financial independence is not something that happens overnight.
  • Even those who come into wealth don’t necessarily end up financially free because they generally don’t have the money management skills to manage and grow their windfall.
  • Working towards financial independence will take time, and it will take successfully ticking off a number of smaller steps.
  • Eliminate bad debt like personal loans and credit cards.
  • Create and keep to a budget.
  • Establish your long-term financial goals.

Live below your means
  • An important strategy, but one that people are scared about.
  • Spend less than you earn to be able to save.
  • The extra money will allow you to invest in assets that will improve your financial position.

Save an emergency fund
  • Save an emergency fund for unexpected expenses or life changes.
  • Utilise a high interest savings account or an offset account if you have a mortgage.
  • An emergency fund will ensure you have the cash flow to finance any unexpected events such as broken car or loss of employment.
  • Don’t resort to using a credit card or some other means of support.

Invest regardless of the market
  • Invest to improve your finances regardless of what the market is doing.
  • Buy when demand is low to get a better negotiating position.
  • Fewer buyers generally means lower prices, which you can profit from.
  • Stick to a plan and patiently achieve each step along the way to come out on top in the long term.
Information paraphrased from: 5 critical steps to financial independence by Michael Yardney. Read the full article here.

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