Financial independence can be defined in a number of ways. However, when most think of financial independence they dream of a time in their lives when they are generating enough income to cover the essential expenses so that they never have to work again. For some, financial independence is far off into the distance, for others it’s within close reach. Wherever you fall on the spectrum, here are 10 financial rules to never break if you want to achieve full financial independence someday:
Earn More Money Than You Spend
You obey this principle by always living below your means. Follow this simple rule, no matter what your income and everything else will fall into place. As your income goes up, so will the extra money for savings and investment.
Make a Budget and Stick to It
You cannot live within or below your means without knowing what your expenses are and where you can start cutting. The path to that higher knowledge is a budget. There are dozens of free budget templates online. Fill in the template blanks and you’ll learn some rather eye-opening facts about where your money is going. Follow that budget and see how spending discipline give you an immediate leg up on financial independence.
Eliminate Unnecessary Living Expenses
Take a critical look at your budget. Are you spending over $100 for cable TV, for example? Cut the cable and save an extra $1,200 a year. Look everywhere and be ruthless.
Get Into Daily Financial Awareness Habits That Result in Wealth Accumulation
If your daily habits include a stop at Starbucks for that $5 latte, you are spending $100 a month — another $1,200 a year. Make your own frothy caffeinated beverage from the mixes on sale at your grocery store. Look for ways to save costs and expenses through coupons and sales. Keep track of your monthly bills and look for ways to cut down on energy expenses, for example.
Avoid Money-Making Schemes and Scams
No matter what the slick infomercials and bombastic websites shout out, there is no shortcut to wealth. Anyone who advertises that buying their plan or paying to attend their seminar is manly only interested in making money from you. That meets their financial goals, but detracts from yours.
Pay off Your Debts
If you are bogged down in heavy debt and your monthly expenditures are beginning to leapfrog your income, it may be time to consolidate your debts. There are many pathways to debt consolidation. Check around on the web. There is help out there.
Pay Your Monthly Credit Card Bill on Time
If you’re carrying a monthly balance on your credit card, you’re swimming upstream in your quest to get out of debt. Consider instead using a bank debit card, or at least get into the habit of paying off your monthly credit card balance.
Begin a Savings and Investment Plan
Start slow if you must, but save something each month. You’re in this for the long term and your goal is to be debt-free and to accumulate real wealth (i.e., to be financially independent). The savings and investment plan that is best for you depends on your age, situation and how much you need for a comfortable retirement. Again, look around. There are financial experts and expertise out there ready to help.