Financial Independence is a great thing. It means you can choose to do what you want without relying on your job to support your lifestyle. Who would not want that? More and more people are trying to become financially independent.
However, the road to Financial Independence is paved with obstacles. To overcome these obstacles, you will need to use all the weapons that are available to you. Mastering these weapons will make your journey to Financial Independence faster and simpler.
In this post, I will go over the nine most essential weapons available to you to reach Financial Independence. Some of these weapons are essential, while others are more optional. However, you must use a combination of these weapons and master them if you are serious about becoming financially free!
Stay tuned to master your fight for Financial Independence!
Nine Essential Weapons To Reach Fire
Frugality is your primary weapon
To reach Financial Independence, you need to be frugal. Frugality is one of the best weapons for Financial Independence. This is not a mandatory requirement since you can reach Financial Independence with any level of expenses. However, the lower your yearly costs, the faster you will achieve Financial Independence.
By definition, you will reach Financial Independence once you have accumulated enough net worth to cover your yearly expenses for 25 years. Another possible interpretation is to get enough passive income to cover all your annual costs.
So, if your expenses are lower, your net worth, or passive income goal, will be lower. You will have to accumulate less money before you can reach FI. Spending 10% less each year can save one or two years from your journey to Financial Independence!
There are many things you can do to save money. You can start by stopping eating out too often and cooking yourself. There are many ways to save money on groceries. Many people are paying for things they do not need. You can cut some of your bills if you do not use them as much as you think. Some people are going very far to save money. You need to find your balance of frugality.
One thing that is important to keep in mind is that you will need to keep that level of frugality once you are financially free. If you do not feel comfortable with your current frugality, you should fix it before you retire!
2. Your Main Income
Your primary Income can be extremely sharp!
Frugality, in itself, is not enough. You must save money to increase your net worth and reach Financial Independence. Therefore, your Income is a potent weapon! You should sharpen it as much as possible. Do not let your Income Weapon rust!
The more money you get monthly, the more you can add to your net worth. Therefore, increasing your Income goes a long way toward speeding up your progress.
Reducing your expenses has a lower limit. There is a point under which you cannot cut it further. On the other hand, increasing your primary Income is almost limitless. Some ways to improve your primary Income can be complicated. But there is more potential in increasing your Income than in reducing your expenses.
On the other hand, when you increase your Income, you have to be careful not to become a victim of lifestyle inflation. Do not be tempted to spend more because you are earning. Lifestyle inflation is the reason why a lot of high-income earners are not wealthy!
How to increase your primary Income will vary from job to job. There are many ways to improve your career income. But there are some simple strategies to increase your primary career income. For instance, you should not wait for a raise. You should ask for a raise if you deserve it! If you can do more, do not wait to be asked; ask for more responsibilities! You could also get more education or even change jobs.
Considering your career as a weapon will help you make it stronger. And wielding a more potent weapon will improve your journey toward Financial Independence.
Crush inflation with the Investing Hammer.
If you master the first two weapons, Frugality and High Income, you will save a lot of money monthly. Unfortunately, inflation causes your money to lose value every year.
You need to fight inflation with your Investing! You will need to invest your earned money. Not only will this negate the results of inflation. But this will also make your money work for you. If you invest your money in broad market index funds, you can expect between 5% and 8% returns on average every year. This will mean that your net worth will generate more money! Your money will work for you instead of you working for money!
I have said that having more Income will make you become Financial Independence faster. Investing your money works in the same way! If you invest most of your savings, you will accelerate your progress even further!
Investing is probably the most complicated weapon to master. But it is mighty. However, if you keep to the basics and invest in broad stock market indexes through ETF, anyone can learn it. The simplest way to support this is to use a three-fund portfolio. Stay clear of actively managed investments. Their fees will eat through your returns. By keeping investing simple, you will reap the profits of the entire stock market and minimize your fees!
4. Passive Income
Your Financial Number is based on your yearly expenses. But what if you could get some income in retirement? And what if this Income did not require you to do anything? Passive Income is a mighty weapon to reach Financial Independence faster.
Passive Income can make a huge difference! If you have yearly expenses of 50’000 dollars and a passive income of 10’000 dollars each year, you only have 40’000 dollars left to cover. That means that your FI number will be 10’000 dollars lower! If you use the 4% rule, you will have to save 250’000 dollars less before being financially independent.
Dividends are an easy way to generate some passive income. Most stocks will pay dividends. If you invest through a broad index ETF, you will receive some dividends quarter after quarter. This can be used to grow your Income. And it can also be used to cover your expenses in retirement. The most used passive income stream is tied to the previous weapon, Investing.
Another passive income stream is Real Estate. If you own and rent a house, you will receive some money, month after month. This is not as passive as dividends. But it can generate handsome returns and passive solid Income. Many people are financially independent only through real estate investing.
SomSome companies allow you to invest in real estate projects without having to do any of the heavy liftings yourself.
One example is DiversyFund. It’s a private REIT (real estate investment trust) that allows you to invest in professional real estate projects passively for as little as $500. The thing I love about companies like DiversyFund is that they don’t make money unless the investors make money since they invest and manage the projects themselves.
There are many other ways to generate passive income. Every little bit of passive income that you will have will help you reach Financial Independence faster.
5. Side Hustles
Your side hustles can hit many targets!
Another extremely efficient weapon to reach Financial Independence is to start a side hustle. A side hustle is a small job next to your main career job that will bring some extra income. You can even go one step further and have several side hustles.
Now, this is not for everybody. It would be best if you kept a balance between your life and your job. This means you will have to work more while accumulating your net worth. However, this can make it significantly faster.
Once you are financially independent, every bit of Income will help. Also, side hustles can help you while you are financially free if you continue them. For some people, this is not staying true to the definition of financial Independence since you still rely on this Income. However, the purpose of Financial Independence can be adapted to everybody!
There are many side hustles out there. From the weirdest, sell used panties to something more conventional such as flipping cars. You could tutor kids in your area. You could also drive people around for money. Or, if you are a handy person, you could build and sell things. And if you do not make things, you could buy and sell them for more. Finally, starting and monetizing a blog is a very trendy side hustle.
Everyone is different and will consider some side hustles, but not all of them. Some people will have many side hustles, while others will have none and solely focus on their careers. But it is essential to know that the weapons are available should you need them! Everybody is free to choose their weapons.
Patience is an important weapon. Even if you master all the weapons already mentioned, you will not become Financially Independent in one day! But this is not an easy one for some people.
For most people, reaching Financial Independence will take five to fifteen years. It is crucial to be patient during your journey.
All along the way, you must be careful to continue improving your usage of all the other weapons. And do not get distracted out of your path!
If your only goal is to become financially free in five years, the first years will be challenging to keep motivated. One way to make it easier to wait until the end of the journey is to have small goals along the way. For instance, you can make it your goal to achieve an FI ratio of 10% in the first year. Or reduce your expenses by 10% in the first two years. By having small goals and fighting to reach them, waiting for the primary goal will be easier!
7. Positive Attitude
Use a Positive Attitude as a shield.
Another thing you will need in your journey is a positive attitude. You should use this as a shield! Indeed, you will likely encounter many criticisms once people become aware of what you are trying to achieve. You need to shield yourself from this.
Many people will likely think that what you are trying to achieve is impossible. This is especially true if you are planning to retire very early. Once you tell people you will quit before you are forty, they will, at the very least, be very skeptical. Some people will be interested, of course. But I do not think this is the majority of people.
Moreover, there will also be people telling you that early retirement is bad for the economy; hence, other people depend on this economy. Some people are saying that this will cause a lack of workforce. They are also afraid of the lack of talent in some companies.
I do not share any of these beliefs. However, we should be prepared to hear them and accept them. We should keep a positive attitude against these negative comments.
Online security is your armor.
In this age, many of your financial tasks are likely made online. You must ensure that all access to these online services is as secure as possible. Security is an essential defensive weapon. You should view it as your armor!
It is imperative to be serious about security. If your broker account is compromised and you lose a lot of money, this could seriously affect your path to financial freedom. The same is true if someone spends a lot of money on their credit card.
The first thing you should do is to use a long password for each of your online services. And it would be best if you never used the same password twice. And if you can, you need to use two-factor authentication as much as possible. It should be mandatory. More and more online services offer it these days. But too often, it is an option.
Another thing that you need to secure is your phone! You can likely access your financial accounts from your phone. Therefore, you must ensure it! And this is even truer if you use your phone as a two-factor device. You should use a code instead of a pattern as long as you can. And you should make sure your phone locks automatically after some time.
Finally, if you use debit and credit cards, you should make sure to use a different PIN on each card. And block a card as soon as possible if you suspect foul play.
9. Credit Cards
Your credit Cards are like daggers – Small, but you can wield many
Credit Cards are often considered a bad thing by many. And it is true that if they are misused, they can significantly slow down your finances! However, if they are used correctly, they can serve you well.
The most important things are to avoid any credit cards with an annual fee. This will save you money every year. You only need to consider free credit cards.
Then, you will need to take the credit card that will bring the most returns to you. This can be in the form of pure money cashback. Or this can be in the form of coupons that can save money on things you would purchase anyway.
You will probably need a travel card to save on foreign exchange currencies. Most banks will charge between 1.5% and 2.5% on each transaction you do in another currency than yours! You can eliminate all these fees with a travel card. Traveling or purchasing things online in other countries can save you a lot of money.
You must use credit cards correctly. You should never carry a balance on any credit card! You cannot go wrong if you consistently pay your credit card bill in full and choose a free credit card with some cashback!
Your credit cards are smaller weapons, like little daggers. But you can use several of them to make an enormous impact! You will need all the weapons you can get to become financially independent.
Financially Independent Retire Early
These nine weapons are essential tools you should use in your financial freedom journey. You do not have to use all of them, of course. But you should know that they are here for your use. And the more you wield, the faster you can reach Financial Independence!
You should use as many of these weapons as you can. But it would be best if you also learned how to master them. Sometimes, a powerful weapon can overpower several other weaker weapons. And in some cases, you can improve your guns yourself. And since every journey toward Financial Independence differs, you can even make up your weapons!
Not only will this make Financial Independence possible, but it will also allow you to reach your goal faster. You want to make your journey the best possible one.