Financial Independence is all about personal wealth, generating income that is grater than your expenses. In most cases it is one’s assets that generate the income rather than having to work actively for basic necessities.
There are many ways to achieve financial independence, however there are stages. At one point of time in our lives, we were once dependent on someone. If you are young and transitioning into adult-hood, you are dependent on your caregivers or if you are an adult and hit a road block, you are dependent on the aid of someone else. Regardless, we all start from some where.
Financial Solvency is the first stage in achieving Financial Independence. You are able to support yourself based on your own income without the help of another. Your bills are current and your expenses are equal to your income. You are not in debt!
The next step is to build an emergency account, this is different from your savings account. We all know in life, the unexpected always occur. Good or bad, you still need access to money. You need an emergency account so you will not fall back in debt. Or an emergency fund to take advantage of the “good” unexpected opportunity.
Get rid of the Debt! Consumer debt, high-interest rate Credit Card debt, Depreciating asset debt- Student loan debt- Any debt.
Financial Security, is when your investment is paying for your basic needs. Food, Housing, utilities, Insurances, transportation etc. You have attained a high level of financial Security- However when your Investment is paying for your current LIFE STYLE Expenses- that is when you have achieved Financial Independence.
Don’t let that be the end all- there is Financial Freedom (Goals that are beyond your current lifestyle expenses) and Financial Abundance (Surplus Beyond Measures)
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