How To Become Independently Wealthy
Many of us dream of having enough wealth to walk into work one day, tell our boss, “I quit!†and walk out the door never to return. To not rely on anyone else financially, or on employment to support yourself is commonly called being independently wealthy. Becoming independently wealthy doesn’t usually just happen in an instant, unless you win the lottery or have a rich family member leave you their riches in their will. It takes hard work and very specific actions.
Step 1 To Becoming Independently Wealthy: Create Financial Surplus
The first step to becoming independently wealthy is to create some cash within your current budget to work with. You’ll want to evaluate each of your expenses, and cut anything unnecessary or that doesn’t give you enough value to make it worth it. You might also look to increase your income by working overtime or a second part-time job. Through a combination of reducing expenses and increasing income the goal is to give yourself funds to work with to get the process going.
Step 2 To Becoming Independently Wealthy: Create Passive Income
A person working to become independently wealthy will use the funds generated in step one to generate passive income. Passive income is money earned by a person not having to put in any effort. In other words, it’s putting your money somewhere that it grows on it’s own. There are many popular ways to do this:
- Invest In The Stock Market : As the stock market goes up, your initial investment will grow. There is, of course, some risk as the stock market could go down. However, over the long term, the stock market trends upwards providing a return higher than a simple savings account.
- Invest in a Business : Maybe your best friend is starting what you believe will become the hottest new place in town. All he needs to get started is some capital. You can invest your money for a slice of the profits.
- Invest in Property : Over time property values go up. While you’re waiting you might even be able to rent it out generating rental income generating additional income.
Step 3 To Becoming Independently Wealthy: Diversify
To reduce risk, someone working to become independently will put their money into several different wealth building techniques to protect their wealth should one of them not work out. For example, if your friend’s business doesn’t turn out as expected, you would still have your stock portfolio and your rental property.
Becoming independently wealthy is not a get rich quick scheme. It takes hard work, and time to let your money grow. When the income generated from these activities exceeds your cost of living, then you no longer need to get up in the morning and go to work. You have become independently wealthy!
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Brought to you courtesy of Brock
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Brock is a software engineer by day and personal finance blogger at night. He is a fitness junkie and enjoys grilling and smoking meat. Married with two children, Brock strives to improve his skills as a husband and father, and is always on the lookout to stretch his family’s budget as far as he can.
That’s very good advice to “evaluate each of your expenses, and cut anything unnecessary or that doesn’t give you enough value to make it worth it.” I need to do that and see how much extra money can be gained each month.
I go through an evaluation of all our expenses every couple of months. What seems worth it now, may lose it’s value over time – OR I might pick up something that I shouldn’t have. It’s always worth the effort!
It takes a lot of steps to get to being independently wealthy, but I don’t think it’s quite as hard as everyone things. I’m nowhere near it myself, but I am about halfway down your list towards it and none of the steps have been that terrible. It’s just a matter of making yourself do it.
Exactly, Mel – just like achieving any other major goal in life, it requires patience and consistent action. Sticking to something for a long period of time is what gets people.
I have a one track mind sometimes, so diversifying takes extra effort to make myself branch out. But it’s a step you just can’t skip if you want financial freedom.
True story, Jamie. While single tracking your wealth building efforts might work well for a time, it’s a dangerous game just waiting for catastrophe to strike.
My husband and I want to invest in real estate after pay off our mortgage, so I’ve been reading a lot of real estate blogs and listening to real estate podcasts to prepare for that. Interesting read!
You’re putting in the time to building your knowledge foundation, which is a great thing. Jumping into something uninformed is a recipe for failure!