Take a moment to imagine that you:
- Know exactly what makes you happy and actively work towards experiencing your perfect life
- Love getting up in the morning and can’t wait to start your day
- Are passionate about what you do
- Have full control over how you spend your day
- Don’t feel like you’re missing out on your family and time with your children
- Have financial security and don’t worry about paying the bills or being able to retire
- Have the time, flexibility and finances to travel
Personally, I dream of the day when I can have complete flexibility in how I manage my schedule. I want to fit in healthy activities and family time including meal prep and creation, gardening and home management, as well as 20+ hours of dedicated work on my own business.
This is what financial independence is. It doesn’t have to mean early retirement, but it can if that is what you want. For me, it would mean decreasing my commute time to zero and work hours from 30-50 hours to just 20 hours a week.
You get to tailor your financial independence to mean anything you want. It is freedom from being required to work that W2 job in order to bring home a paycheck. Once you break free of that cycle, you get to choose how you spend your time. Every day, for the rest of your life.
Why wouldn’t you aim for financial independence?
Why financial independence is important
Financial independence and financial freedom are very similar. I think of financial independence as the first step to the full freedom of early retirement. There is a time before your passive income covers all of your living expenses, but you become comfortable enough to be free to make different choices.
Financial independence is freedom from being required to work a job you don’t love. If you quit today and didn’t have a paycheck for a few months, it would be okay. This could be money you have saved and can last for months to years. It could also be passive income streams you have that can be combined with savings to cover living expenses for awhile. Some people call this “F-You money”.
Once you reach this level of security, you get to say “f-you” to situations you don’t want to be in. You can leave the job that’s stressful and taking over your life because you have time to figure out a plan B.
Financial freedom is reached when you have enough in passive income to cover all of your monthly expenses and don’t need to worry about making money at all. This is early retirement.
While you may or may not to set the goal of financial freedom, achieving financial independence has a lot of benefits. Here’s a few:
- Financial independence allows you to pursue your passions.
- You have the freedom to spend time with the people you love
- Your decisions are not centered around finance
- It’s perfectly doable, regardless of whether you earn a low or high income
Understand Financial Independence Starts with Independence
“The idea that ‘it takes money to make money’ is the thinking of financially unsophisticated people . . . Every self-made person started small with an idea, and then turned it into something big . . . It’s what is in your head that determines what is in your hands. Money is only an idea.”
Too often, people chase financial stability their entire lives because they are dependent upon a structure that’s designed to keep people indebted. Whether it’s paying excessive taxes or spending your life making someone else rich, the default operating system keeps the average Nigerian, Chinese or American poor.
The solution to getting out of the Matrix is simple.
Becoming financially independent is something everyone can do. This is because all people can learn more about how to become wealthy, change their mindset around money, and increase their financial IQ.
Those with a high financial IQ become experts in four areas:
- Accounting: Properly managing your cash flow requires the ability to read and analyze financial statements. With this analytical skill, you can identify the strengths, weaknesses, and opportunities of any business.
- Investing: Investing is the science of money-making. While it can be a creative process, there are strategies and formulas a person should know and use to generate wealth.
- The Markets: Wealthy people understand supply and demand. Those with a high financial IQ know the emotion-driven market, but also have knowledge of how their investments fit into the grand scheme of the economy. This helps a person invest in assets with the highest return.
- Law: Knowing federal and state law aids business owners and investors in rapidly excelling their wealth. For instance, if you’re aware of tax advantages and the legal protections of a corporation, your wealth will grow quickly. Understanding taxes provides money-making opportunities, gives you some power and control over your finances, allows you to create more assets, and lets you reduce expenses.
With this, you can also capitalize on legal loopholes—a strategy most extremely wealthy people follow. One of the top benefits of owning a corporation is paying for expenses before paying their taxes. It’s how the rich live extraordinary lifestyles without facing massive debt. As their corporation earns money, they spend almost everything the business makes to avoid paying tax. Board meetings in Hawaii, luxury cars, and fine dining are all paid for legally with pre-tax dollars.
Knowing the law also prevents a business owner from financial ruin should a person sue them. Most wealthy people own nothing. Their money is hidden in safe places like corporations and trusts, which protect their assets from creditors.