Since we are still celebrating Independence Week to honor our brave forefathers who gallantly fought and liberated us from the tyranny of foreign oppressors, I believe it is timely and appropriate to write a piece on financial independence. You see, despite the freedom that we are experiencing today, many of us Filipinos are still enslaved to other forms of despondency. One of these is poverty, which is the lack of sufficient funds and material wealth.
According to Wikipedia, Financial Independence is the state of having sufficient personal wealth to live, without having to work actively for basic necessities. Much of the things we do right now to improve our personal finances are meant to reach that ultimate goal in which we no longer have to worry about money and/or its source. Financial Independence, also called Financial Freedom, gives peace of mind and allow us to enjoy a much better life.
The following are important habits that you can develop in order to be financially independent:
1.) Pay yourself first
As a Financial Adviser, I advocate that you must always reward yourself first every time you receive your paycheck by setting aside at least 20% of the net income. This way, you will be able to build your savings which you can use for some other important things. Doing this regularly can result to a more disciplined spending habit since you are also teaching yourself to live on a smaller budget.
2.) Spend much less than you earn
This can really be challenging because the natural tendency is to spend more when you have more money on hand. It would take a lot of discipline to be able to curtail the desire to splurge money but once you have overcome this financially-depleting practice, it can open up great opportunities for you to save more money towards achieving your life goals.
3.) Keep investing
Just like what I keep on reiterating in my previous blogs, investing is very essential in making your money grow over time. It is unwise to rely on the salary you are earning today and hope that it will make you financially sufficient in the years to come. You must always look for great opportunities to multiply your hard-earned money through sound investments. According to investment guru Warren Buffett, “if you don’t find a way to make money while you sleep, you will work until you die.” Investing can provide passive income, making your money work hard for you instead of the other way around.
4.) Live within your means
This one right here is somehow related to Habit #2. Always keep your lifestyle in check and learn to live within your financial capacity. Putting this habit into good practice will keep you from incurring unnecessary debts. Being free from debt equates to having Financial Freedom.
5.) Ignoring the Joneses
This is a foreign idiomatic expression which simply means you should not try to copy the lifestyles of other people. Just because your neighbor Mr. Ayala bought a brand new Ferrari 250 LM does not mean that you should also purchase something in the same category just to send the message across that you are not poor. Well in fact, comparing your lifestyle more often than not to somebody else’s as a benchmark for social class will truly hurt your finances in the long run. Keeping a low-key way of living can bring you one step closer to realizing Financial Freedom in your life.