What is Financial Independence?

In honor of Independence Day earlier this week we’re talking about the concept of “financial independence.” Financial independence is sort of an extreme version of financial wellness where the goal is to accumulate enough wealth to live comfortably without depending on employment income. It’s basically having enough money so that you don’t have to work. Sounds great, but it’s probably unrealistic for most people. The good news is the same skills and ideas that lead to financial independence also apply to the average person who just wants to be financially healthier.

Inc.com recently shared a list of one-sentence personal finance rules for achieving financial independence based on the simple principle of spending less than you earn. (If that sounds familiar, it should. It’s one of our basic cornerstones of financial wellness.) Here are a few of our favorites from their list:

• “If you spend your money on things, you’re left with the things, not the money.” That desire for the next “cool” thing you just have to have is never ending. But the joy you get from buying it never lasts as long as you’d like. As soon as you buy that car, phone, or pair of shoes they’re no longer new to you and you’re on to wanting the next new thing. The joy fades fast. Plus you’ve got a car that’s worth less every day you own it and you still have to pay more to maintain it. Slow down and try to only buy the things you need, not the things you want.
• “Saving $1 is like earning $3.”  Save one dollar and you’ve got one dollar. Earn $3 and about a third goes to taxes, and you’re probably going to spend more now that you’ve made more. You’ve worked for $3 to end up with $1. Finding ways to save money is usually easier than finding ways to earn more income so comb through your expenses to find less expensive alternatives to some of your more costly habits.
• “Not maxing out the employer 401(k) match is giving away free money.”  If your employer offers one, make sure you contribute as much as you can in order to receive your employers’ full match.  Otherwise, you’re leaving money on the table and losing out on future compounding and growth.
• “Borrowing money takes minutes; paying it back seemingly takes forever.”  Swiping that credit card is easy – too easy. Paying with borrowed money makes the things you buy more expensive when you have to pay interest for months or years afterwards.  Remember that credit card companies lend you money because they know it pays off for THEM in the long run, not you. 

If financial independence is a goal you would like to accomplish, BrightDime can help. Just login to your account and start the conversation.