To become independently wealthy, you need a plan and the patience to succeed. People strive for wealth independence for the simple reason that it solves all of their money problems. While it might sound difficult to do that, the opposite is true. Wealth independence can be achieved through steps that every person can take. Since the ultimate goal is to avoid living paycheck to paycheck, wealth independence motivates you to reach this goal.
In this short guide, we will talk about the eight steps to becoming independently wealthy. So with all that said, let’s start.
What Does Becoming Independently Wealthy Mean?
Becoming independently wealthy means having enough money to live the life you want. For some people, it means having enough money to quit their jobs and live out the rest of their life in financial security. For others, it means never relying on any financial support. You can achieve this financial status through investing, saving, passive income streams, lifestyle change, etc. Being independently wealthy also means paying bills and living expenses without any additional income. Your newfound lifestyle is entirely covered by the wealth you’ve so far amassed for yourself.
There is a big misconception that not everyone can live an independent wealth lifestyle. But in reality, any person can do it if they play their cards right. This lifestyle isn’t limited to only entrepreneurs. Any person with a job can become independently wealthy. So how much money do you need to do that?
How Much Money Do You Need To Become Independently Wealthy?
Experts say that becoming independently wealthy means having 25 times your annual expenses. Using a simple formula, you can calculate how much money that is. If your living expenses are $30,000, to become independently wealthy, you’ll need $750,000.
The more your annual expenses rise, the more money you’ll need to sustain the lifestyle. So if you plan on spending $50,000 the following year, you won’t be independently wealthy with a portfolio of $750,000. The more you plan on spending, the bigger your investment portfolio should be.
With all that out of the way, here are the eight steps to become independently wealthy.
The 8 Steps To Becoming Independently Wealthy
Any person can achieve independent wealth by following these eight simple steps.
One of the most important steps is to spend less than you make. This simple step is something that everyone should do regardless of pursuing independent wealth. Overspending is a big issue in modern society. Since we live in an age of consumerism, it’s difficult to not overspend. With credit cards wreaking havoc, overspending prevents millions of people from reaching their financial goals. So ditch the credit cards and get your spending under control by creating a budget and cutting costs.
Put Debt To Rest
Debt can cripple any person. Debt also comes in many forms. One of the most common forms is credit card debt. Other forms include car loans, student loans, and other personal loans. When asking how to become independently wealthy, you need to ask how much you’re in debt first. Eliminating debt must be a priority. But you can’t eliminate debt if you’re overspending. Once you stop overspending, use what’s left of your income to put debt to rest. There are tons of hidden benefits of paying off debt. More so, these benefits will directly help you achieve your financial goals.
Learn To Invest
Once you stop overspending and have eliminated debt, the next step is to build an investment portfolio. There is a huge difference between investing and investing smartly. You could invest in digital real estate, but do you even know what it is? Education is important when looking to invest. Fortunately, there are tons of ways to educate yourself on the world of investing. We recommend listening to these 7 investing podcasts to give you a rough sense of what it means to invest.
The world of investing is huge, and tons of opportunities exist. While you could go down the traditional route by investing in stocks or bonds, some of you might be more interested in investing in cryptocurrencies or NFTs. Regardless of what appeals to you the most, learning the fundamentals of investing will set the foundation for a successful portfolio. With a successful portfolio, you are one step closer to independent wealth.
Play the Long Game
Likely, you won’t make any significant progress by prioritizing short-term gains. Becoming independently wealthy doesn’t happen overnight. It takes years and even decades to reach this point of financial wealth. So that should also be the strategy when investing. Playing the long game gives you more time to make more money.
Through time, your investments will rise and then fall. But remember that you’re in it for the long haul. So if you’re using a long-term investment strategy, play it.
Find Ways To Make More Money
The very first step to becoming independently wealthy is to reduce expenses, which gives you more money to pay off debt. But when it comes to independent wealth, the goal is to find more ways to make even more money. With more money, you can invest more and hasten the process.
To make more money, the easiest thing to do is to find a way to maximize your earnings while doing the same amount of work. This means asking for a raise or looking for a higher-paying job. You could also go down the more difficult route by looking at a career change. To do that, you will need to develop income skills. Fortunately, you can develop these skills for free. Here is a guide we have on the best high-income skills.
Apart from a career change, you could also take a part-time job. There are tons of ways to make money working as a freelancer. Here is our guide on the 9 best freelance jobs you can work from anywhere. These three ways should be enough to help you make money to increase your investments.
This step is equally important to investing. Investing is a strategy that will pay off in the long term. But that doesn’t mean you shouldn’t also save. Like investing, saving can also be a long-term strategy. By allocating 15% of your monthly paycheck into an investment account, you could potentially build enough money to start earning passive income. There are tons of savings strategies out there that earn passive income. One of the best ways is to put your money into a high yield savings account, an ROI IRA, or 401(k).
Pay Off Your Home
Owning a home in financial terms means owning equity. But most homeowners lack the money to buy a home in cash. So what they do is they take out a mortgage loan. Paying a mortgage loan means being financially obligated to pay monthly rates for the next 20 or 30 years. By focusing on paying off the mortgage first, you’ll be one step closer to fully owning the home. Paying off your mortgage helps build wealth and increase your net worth.
And the last step is all about timing. When becoming independently wealthy, there is no better time to start than now. With more time on your hands, you have more time to build wealth and achieve your financial goals. Remember that it’s never too late, and the sooner you start, the better.