Financial independence is a subjective concept, dependent on the situational worldview of an individual. As per a 2013 survey by Capital One 360, 44% of adults felt that financial independence is synonymous with no outstanding debts, 26% believed it meant having emergency savings, while 10% related the concept with early retirement. However, financial independence, in the general sense, means that an individual’s assets are able to produce enough income for them to be able to lead a comfortable lifestyle while having access to a savings fund. If you wish to acquire financial independence, here are 5 things which might be holding you back.
1. Lack of Clear Financial Goals
The future is unpredictable, the present is volatile. However, it is a good idea to set a target in the future in terms of attaining financial independence. You can start by asking yourself some basic questions pertaining to future plans: Do you wish to retire before the age of 65? Do you want to travel the world at some point in your life? Are you earning enough to be able to save a stipulated amount of money per month for an emergency fund? The fulfilment of these desires hinges upon a significant amount of money. Once you have your financial goals in place, it will be easier for you to start saving.
2. Not Being Able to Save Enough
It is crucial to be aware of your current savings, along with how much you would need to save in order to be financially secure. You can use certain apps to imbibe money-saving habits, based on which, you can make realistic projections about retirement. A good way of saving money is to automate it. Set up an automatic monthly transfer into your savings account, even if it is as little as 1,000 bucks per month.
3. Not Paying Off Consumer Debt
In case you’re carrying a credit card balance every month, financing cars, or paying a minimum on your student loans, compound interest is gradually evolving into your nemesis. While it is okay to avail cash advance loans or cash loans online, you will fall into an inescapable debt trap if you fail to pay back on time. Creating an effective strategy to pay off debt as soon as you can, should be a priority for anyone wishing to achieve financial liberty. If you wish to tackle credit card debt, there are debt management methods, such as Debt Snowball and Debt Avalanche that can be of some help. The former entails paying off the smallest balance first and working your way up, while the latter starts off with the highest interest rate being paid off. While both methods are highly effective, you should choose as per your preference.
4. Giving into Lifestyle Fads
A high and steady income does not automatically equate to sustainable wealth. As you move up your career graph, it is imperative that you will be tempted to upgrade your lifestyle. You might be thinking, why shouldn’t I reward myself for all the hard work I have done? While your desires are valid and you should indulge from time to time, it is important to live modestly in order to facilitate future savings. Making lifestyle upgrades solely because those around you are doing the same will not help you in the long run, but leave you with things you do not need, along with a financially bleak future. Resist the urge to give into fads just for the sake of it.
5. Being Driven by the Fear of Missing Out
The fear of missing out, or FOMO, is the defining emotion that drives millennials forward in life. The need to constantly portray the best versions of ourselves on social media platforms have deluded us in terms of realistic goals. FOMO, coupled with the need to keep up with those around you, can compel you to spend more than you can afford, leading to lavish vacations, clothes, spa treatments, and other ways of showing extravagance. Social media platforms are used by most people to portray narratives somewhat removed from reality, hence, do not trade your real-life happiness for the same.
With the help of these tips, we hope that you will be able to achieve financial independence soon. May 2019 be a year of abundance!