The first - most important step to became Financially Independent.
What is Financially Independence? At least for me….
The question above is very powerful. It’s powerful because if you can define what “Financially Independence” means for you — you are a step closer to become “Financially Independent”. You may think this is too simple for you, however, I know a lot of people at the age of 22+ which doesn’t know what it means for them and if they know — then the definition is somehow very general, such as: “It means for me a lot of money which makes me happy “. Starting with this presumption, most probably, they will never achieve it and if they will — they won’t know.
First of all — I’m not “Financially Independent”. However, I knew exactly what does it means for me and I will know when I’ll achieve it. When I started my professional career(and it doesn’t matter what the field is), I became somehow — obsessed about money. And this is not the thing I wish for you. Becoming obsessed about money did transform me into a more depressed person who always cared when I spent every cent. Every cent… In the first years of career, at the time when I starting earning money by myself, I’ve tried to save as much as possible from the previous paycheck. And it didn’t matter if I’ve saved a lot. I had no reward scheme. I had no clue about how much do I need to save and until when. So, this is a very dangerous path, because even if I’ll have a lot of money — I’ll not stop doing this.
At that point, it was clear that I have to change something and define exactly what “Financial Independence” means for me. In the beginning, it was something like: “I do need enough money to buy whatever I want”. Don’t have such a desire — it’s a creepy and dangerous one. However, it’s not impossible to achieve this desire. But for most of the people — it will be a failure. Years passed, and I somehow knew that this is not the way to go. So, the redefinition, which is the current one of what the Financial Independence means for me is this one: “To earn the same amount of money, monthly, I earn now working — but without working”.
I think this is a fascinating one and I truly believe that this affirmation defines the “Financial Independence” for me.
But what this means exactly?
Let’s say you already have a job. A job which fulfills your needs. And also the amount of money you earn on this job — is enough for monthly spendings + x%. About x% I’ll tell you a little bit later.
For example, let’s say you earn now x$/month and those x$ are sufficient enough for your needs. Sufficient in terms that you are not stressed that at the end of the month you’ll need to borrow money. Now, regarding my definition of “Financial Independence”: you have to earn the same amount of money without working for them. Let’s say you want to take 2 months of vacation: than, at the end of each month — you’ll have the same x$ in your bank account.
If I’ll achieve this target, for me, it will mean first of all — freedom. Freedom to do the stuff I enjoy each day, without worrying about doing the staff which I don’t enjoy.
What does it involve?
Of course, the definition is much simpler than achieving the “Financial Independence”. It involves a lot of work and visions at the beginning of the path and not only at the beginning. It may involve being “entrepreneurial” to start businesses, or start investing the money, or another method from your visions”. It doesn’t matter what path or method you’ll choose, but I truly believe that without a saving schema, everyone will fail to achieve the Financial Independence target. And I’ll explain what saving means for me.
About x% discussed above.
I read a few books about this field, but the most important one is: “The Richest Man in the Babilon”. I heard somewhere that there is one book for a specific field that matters the most — other books just repeats the same information with different words. So, in the financial field — this is the book. It’s a really small one with a powerful idea. This idea is very simple: “Save at least 10 percent of everything you earn and do not confuse your necessary expenses with your desire”.
I’ll repeat: “Save at least 10 percent of everything you earn(also known as “Pay you first” principle)”. It doesn’t matter how much you earn: 1$, 10$, 100$…What matters the most — save at least 10 percent of every $ you earn. If you earn 1$ — put 10 cents in a different account. If you earn 10$ — put 1$ if a different account. If you earn 100$ — put 10 $ in a different account. The most important rule here is do not touch that account as much as possible. If you’ll not touch it for years, you’ll have enough money on it. That money, after years and years of saving, can help you to achieve your vision, which I truly believe that you’ll have if you’ll invest enough money in yourself.
After you “paid yourself first”, you should not worry about how much money you spent at the end of the month. The remaining money you should spend in such a way that every need is fulfilled and the money are enough until the end of the month. If at the end of the month there will be a quite big amount of remaining money — you have to increase the x percentage to 15%, 20%, etc. When the balance is achieved, the small amount of remaining money(if such amount will exist), is only to reward yourself. The rewarding method is different for each of us, so you have to think about what is that small thing which makes you happy and it doesn’t cost a lot.
In conclusion
Only 3 things to remember….
- Define what is “Financially Independend” for you.
- Develop a saving method and transform it into your habit.
- Focus on your visions.
