Financial Guidelines For Your Life
There is a consistent goal that all financial advisors want you to achieve.
Financial Independence
Financial Independence (FI) is the ability to live without depending on a job. It does not mean you have to stop working. It means you are able to stop working whenever you choose. For most people, FI is obtained at retirement, say at age 65. But some people stop working earlier, often referred to as Financial Independence Retire Early (FIRE). Some people FIRE at 30 but many are older, typically in their 40s or 50s.
How do you achieve financial independence?
The primary points:
- Do not spend more than you earn.
- Track your spending.
- Invest in yourself. Education is one way of investing in yourself.
- Pay off debt, especially debt with high interest rates.
- Build your primary account balance so you are not living paycheck to paycheck.
- Have emergency money.
- Pay yourself first. Invest as much as you can in an automatic manner, before you can spend it.
- Start investing early to take advantage of long term compounding.
- Always reinvest your earnings so that you get compounding.
- Start a Roth IRA early and invest the maximum amount.
- Contribute to your 401K and get the maximum matching amount.
- Then invest even more than the maximum amount.
- Track your net worth.
- Save for your kids’ education.
- Plan for your retirement and estate.
- Look for other ways to earn extra money.