It will come. Yes, it has to. Of course, I mean financial independence. I am especially talking to you young colleagues more especially those who are still schooling or still staying in your parents’ homes even after starting work. Yes, my finger is also on the spouses that rely on their partner for support. If you don’t plan for financial independence now, it will ambush you because your parents or loved ones will not be there forever. Hey parent! I am also talking to you. If you rely on your child, then think twice because while society does expect children to look after their old parents, the child is not immortal— realities will one day fly hard into your face.
My advice today though is mostly to the youth. Freedom from financial reliance on family and friends is very important. This is a freedom that many young people earn in their late teens to mid-twenties, as they get through college, earn a degree, find a job, and separate themselves from their parents or guardians. For many people, this is financial independence. They strive to be their own person, independent of the people around them, capable of standing on their own two feet. If you can survive for a significant period of time (multiple months) without going rapidly into debt or without a steady cash infusion from your family, then you are on the right path to achieving this goal. Generally, it requires a decent job or income source, a commitment to keeping that income source, discipline to spend within your means, and a desire to actually move on from a state of dependence.
But there is yet another important financial independence – the freedom from financial reliance on creditors. This freedom occurs when you are completely free of debt. No mortgage, no car loans, no debt baggage. Take note that having some productive loans is encouraged for growing your own wealth. Setting this type of independence as your goal takes a strong commitment to the “spend less-than-you-earn” philosophy. You need to be willing to directly put some of your income straight into productive debt re-payments in order to get rid of that debt. This requires enough income to cover your basic expenses and more, a good grasp on how to control your spending, and a debt repayment plan that you are committed to executing. If you are willing to take on all of this, then you are probably ready to take on this financial independence goal.
Finally but perhaps very important, is the financial independence that reflects freedom from financial reliance on employment. To be financially stable, I view this as true financial independence: an end to the financial reliance on employment. It doesn’t mean you have to stop working, it just means that income from your work is no longer a requirement. You have got a number of businesses and investments (financials like shares, real property, farms, etc.). In this case you tend to give the best of yourself on your job because you work without fear or favour—you aim only at preserving your integrity as a star performer but don’t fear being fired.
Many of the same principles for debt reduction apply when seeking freedom from financial reliance on employment. Spend less than you earn and invest the rest of it for the long term. Work on maximising your income and minimising your spending and sock away that difference into active and passive investments. This means not only maximising your career, but maximising your frugality too – know the real value of your time and do things with that time that produce value.
Living on hand-outs is dehumanising and degrading. Financial independence is hence a great goal, but as with any goal, you have to define exactly what it means for you and then define a plan to meet that goal. Blessed weekend to you and yours as you develop the mindset of living a financially independent life!