Don’t take my word for it on how to reach financial independence?
I have asked 12 people who are badass in this community for their best piece of advice. So without further ado. Here are 12 awesome answers!
Track your net worth! By far one of the best things I ever did with my money, as it gives you a fantastic snapshot of exactly where you are at any given point in time. And if you’re not one to enjoy budgeting much, it makes for a killer substitution as well! You’ll know fast whether certain areas are improving or not, and perhaps even more importantly you’ll realize what areas are within your control and which aren’t.
BONUS: it only takes 5-10 minutes to update every month!
My best piece of advice is meta-advice. It builds on Paul Wheaton’s Eco-scale and concerns how to to find the best advice depending on how far one is on the journey towards financial independence.
It’s a logarithmic scale with levels describing how much thought one has given to money, freedom, and consumption. For each step up the scale, there are ten times fewer people. If there are one billion at level 1, there are 100 million on level 2, 10 million on level 3, etc. and maybe ten in the world at the top level.
ERE Wheaton Scale
What’s surprising about the scale is that no matter where one is on the scale, anyone one level higher will always feel inspiring whereas those two levels higher seem too extreme and those beyond three levels look outright crazy. Conversely, it’s always believed that anyone one level behind could easily level up if they just tried a little harder. Those two levels behind the need to pull themselves together and those three or more levels behind are collectively responsible for all the world’s problems.
The Wheaton scale makes it easier to understand how we’re all at different points in our journey towards financial independence. The potential for miscommunication when the gap between levels is too large is worth keeping in mind when talking to others about FIRE.
My best advice to those who want financial independence!
Create thoughts that support you and your ideas! And make a plan of what you want to achieve and when? Once you find your life goal and direction, it all becomes much easier.
Then create some sub-goals that describe how to get to the goals. Divide into so small sub-goals that you feel that you move closer to your big life goal every day. Also, remember to celebrate the milestones every time you reach a milestone.
Also, find good friends/family/partner who will support you and support you all the way. Without support, everything becomes much more difficult. To create good thoughts, you need mental support when you will lose courage and motivation for periods.
Good luck and as my favorite saying goes:
“Whoever does not know which port to steer towards is no wind favorable”.
Set your goals and your thoughts so that you can reach them are the most important.
“I often see that people find it overwhelming to start on a journey towards financial independence and believe you need to be a financial expert to do so. This is so wrong.
The most important thing is always to just get started. Becoming financially independent is often a question of time. The sooner you start paying off your debt, saving, and investing, the sooner you will reach financial independence. If you think paying off your debt seems overwhelming, start by paying off small extra amounts each month. If you think you cannot save more money, try to find one area where you can save a bit.
If you think investing seems difficult, try buying your first index fund or share. By just getting started you will break down perceived barriers to becoming financially independent – and you will be free sooner than you think.”
One of the most valuable pieces of advice I’ve come to love is making sure you understand your ’Why’. Motivation is key for achieving FI as it takes time to reach the end goal. Having a clear vision, goal, and lifestyle as a motivator can accelerate the progress and pump your way through the tough and uninspiring times.
Whether it’s living in a self-built Tiny House with your electric bike or living in a mansion with 2 Tesla’s; Whether it’s having 6 days a week with your kids, or private dinners with the top executives around the world every weekday.
We’re all different. And that’s great!
– Knowing WHY you’re going for FI is a key asset on your FI journey –
Keep it simple
In a complex world, there is both beauty and strength in keeping things simple. You ensure that you don’t get in over your head and utilizing the Pareto principle is a way to get great results across several endeavors, without having to study every detail. I apply this equally to investing, saving money, and cooking, among many other things. Keeping things simple saves both time and energy, which can then be spent on things you really love doing or just people you love.
Isn’t that what it’s all about?
Focus on value.
Too many people spend money without considering what is important for their quality of life and what it takes (in terms of time and energy) to acquire that money in the first place. Reducing spending to focus exclusively on what brings actual value to your life will not only relieve you of unnecessary stress and give you more freedom, it will also be economically beneficial because each dollar spent is two dollars you need to earn. Using the 4%-rule, you need 25 times that (50 dollars for each dollar spent) to finance such expenses from the return of your investments.
The one piece of advice I could give someone who’s on the path to financial independence is to make sure to optimize your expenses. It’s easy to let lifestyle inflation take control as you earn more money in life and advance in your career but if you just buckle down and stay tight on the budget and not let everything be too extravagant, your financial situation will always be improving.
The best advice I can give to attain Financial Independence is dramatically increase your savings rate. The single best way to do that is by cutting your housing expense and that is exactly what House Hacking allows you to do! My wife and I are financially independent today at 26 years old directly because of our choice to save 35% of our budget by living for free!
The single best advice I can give to people who want to retire early?
Start by auditing your spending and leaving only what is needed. And then work on increasing your earnings, while keeping the same spending budget. For every dollar you spend monthly, you need to save $300 to retire!
We have two financial meetings a month: one to review the state of progress/net worth, and the second one to review the spending in the past month. This allows us to catch lifestyle inflation as early as we see its signs!
The single most important thing when it comes to achieving financial independence is having a clear vision of HOW you are going to do it. So many people make the fatal mistake of vaguely saying “I want to be rich” or “I want to be financially independent” without any plan on how they will do it. The truth is, you don’t have to make 6 figures+ a year to become financially independent. You simply need to understand and outline a few simple things:
1. WHY do I want to achieve financial independence? It is critical to have a clear vision of your long term goals that motivate you.
2. Understand and diagnosis your current spending patterns. This is important to understand what triggers you to impulse spend
3. Create a SMART action plan with your finances
4. Tackle and eliminate debt
5. Understand and calculate what your financially free number is. How much money do you need?
To reach financial independence I’d recommend figuring out what your FI number is and then track your progress by tracking your net worth. Tracking your progress will help keep you motivated in the long run.
Financial Independence is about long term commitment and consistency. It is not easy or a decision to be made on a whim. Whether it is just you or you and a partner, everyone involved has to be committed. It takes planning, thought, and full dedication. But, this shouldn’t scare you away. It is attainable. The biggest factor in success is living below your means. The more money you have to consistently commit to this, the fast and larger gains you will achieve. Live intentionally and focus on what you enjoy and what is just extra. Cut excess, stay consistent and the rest will fall into place.
Those who bought the DJIA in 1929 waited 29 years to break even. To avoid that scenario, you have to understand the real value of equity. This is ‘value investing’. I recommend investing in individual businesses with a true understanding of what is under the hood of each company. Index investing is like going shopping and buying one of each item – no matter what the price. When thousands of people shop like that, items become overpriced compared to their true value. You could pay 100 dollars for a bottle of ketchup…Begin carefully selecting the stocks you put in your shopping cart, look at the labels and the price to understand their value. Make intelligent decisions, don’t just follow the crowd.
My Best Advice?
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