According to insurance industry statistics, out of 100 people that start work at age 21, by age 65, 1 will be rich, 4 will be financially independent, 15 will have some money put aside in savings, and the other 80 will still be working, broke or depending on pensions to live. This post is going to teach you how to stay out of the bottom 80 percent of people that never achieve financial freedom.
Income Isn’t Everything
If I could magically double your income right now do you think it will help you become financially independent? Most people usually say yes to this question. But they are wrong. Most of the people that answered yes to that question have actually doubled their income in the past. But somehow that didn’t help them become financially independent. This is because when their income went up there expenses also went up and there wasn’t any money left for them to save.
There is a way that increased income can help you gain financial freedom though. In order to do this you need to split the income increase in half. Half will go to savings and the other half will go to you for spending. Since you are doing this the moment you get the increase, your expenses will never be able to cut into the percentage that you save.
Put 15% of All Income Into Savings.
A good way to insure that your savings account will continue to grow is to invest 15% of your income into your savings account. This may be hard to do all at once but if you slowly start with only saving 1% and increase that by another percent every few weeks you can reach the 15% goal in a few months.
You can make this process easier for yourself in the beginning by lowering your monthly recurring expenses. (http://www.thesimpledollar.com/trimming-the-fat-forty-ways-to-reduce-your-monthly-required-spending/)
If you are already saving 15% of your income and your income increases you should still save half of that income increase on top of the 15% you are already saving. Doing this will almost guarantee you will become financially independent and if times ever get tough there will be more than enough money in your savings to help get you back on your feet.
Make Your Money Work For You.
While having money in savings is great, having that money generate even more money is better. You should start looking for things to invest your money in.
This part is for you to decide. You can chose to be safe and buy bonds or you can go the riskier route and buy stocks. Either option is better than doing nothing and maybe you could use a combination of both.
Here is a good website that can teach you some of the basics (https://www.nerdwallet.com/blog/investing/how-to-invest-money/)
Anyone Can Become Financially Independent
Almost everyone has the ability to become financially independent. You just need to have self discipline and save some of your money to better your future self. Once you get in the habit of saving it will become much easier to do.
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