How to Achieve Financial Independence

The goal of financial independence is to be able to cover living expenses without the need of a full-time job. This goal may be achievable if you can exercise fiscal discipline while taking certain calculated risks. If you want to work towards financial independence, follow these steps.

Assess your station in life.
The conventional path to achieving financial independence is a lifetime of sound money-management decisions. A young adult who sticks to a proven wealth-building plan can reasonably expect to reach the goal by retirement age. However, even middle-aged people may be able to achieve the dream of financial independence with determination, particularly through nontraditional methods.
Embrace austerity measures.
People who achieve financial independence are careful with their money; they only spend it when they have to. Wealth-building isn’t just about creating wealth, but about preserving it, too.
Consider ways you can reduce everyday expenses. For example, many of the biggest expenses you can face are in home repair and maintenance. Many wealthy people learned do-it-yourself skills that allowed them to preserve capital that they could redirect toward investment opportunities.
Take an active role in your investments. Contributing to your 401k is a good start toward financial independence, but it’s often not enough. Learn as much about all available investment possibilities as you can. Start with standard exchange-traded funds (ETFs) and move up to more-sophisticated investment strategies. Consider:
Dividend-producing investments. These can provide passive income, which can play a key role in helping you reach your goal.
Real-estate holdings. Explore investment opportunities in real estate. A rental property can provide another passive income stream while you’re building equity in the home.
Consider nontraditional income opportunities.
Inventing a new product or service or improving on an existing one can build wealth in a short period of time. Writing a book or screenplay also can produce a major income stream, particularly when movie rights are sold.
Build on your success.
Wealthy people take calculated risks to expand their fortune. They often do this by buying a second rental property or adding a second franchise after success with the first one. And they don’t stop there. Financially independent people understand that property and business ownership often grows geometrically, with a corresponding increase in their personal fortunes.
Reject failure.
History is full of examples of entrepreneurs who built tremendous wealth, lost it all, and then regained their fortune, sometimes in a completely different industry. Setbacks occur. But over the long term, you can achieve financial independence if you follow an authoritative financial plan.