A few months ago I wrote about How to Build Wealth. In that post I simplified how to collect, keep and multiply money. In this post I will show you a high-level overview on how to achieve Financial Independence, but before we proceed we need to define what is Financial Independence.
What is Financial Independence?
Financial Independence is when your assets income covers your lifestyle (living expenses) for the rest of your life without having to depend on a paycheck (ordinary income). We can complicate this definition or keep it as simple as possible. For the sake of this post, I will keep it as simple as possible. Financial Independence is related to the Early Retirement concept.
To Know Yourself is the one thing that is vital in Personal Finances, why?
Knowing Yourself always comes up because you need to know what is the money for. If you want money to buy stuff, well, you don’t need to be financially independent for such a thing. You can spend whatever you make on stuff and that will make you happy. Well, stuff won’t make you happy, but that will be content for another post.
You need to answer the big questions in life:
- Why do I want money?
- What do I want to achieve with the money?
- Who am I?
- What are the things that excites me?
- Where am I going?
- What do I want to accomplish?
- How do I see myself 10 years from now?
You need to know the motives behind money and yourself. You need to stop listening to the voices out there and start doing some soul searching. Knowing Yourself is a vital component for success.
Carol Dweck wrote an excellent book about Mindset. The key message of the book is that people with a fixed mindset obstruct their own development through their belief in innate talent and their fear of failure. On the contrary, people with a growth mindset work and train hard to ultimately realize their potential to the fullest. You need to confront your attitudes and idea, so you can develop a growth mindset. Having a winning mindset is key in life, business, career and money. What mindset did Michael Phelps had when he won all those Olympics medals? How did he train for that? For how long he had that mindset? When did he start creating that mindset?
The real trick is to keep growing and learning. The only way to improve in life is to throw in doubt the things that you already know. You need to know where to invest your money before doing anything. You need to learn how to collect, keep and multiply your money.
Your Own Behavior
You need to be mature enough to delay gratification and say NO to family, friends, colleagues and specially, yourself. To have a little bit of control on your own behavior is essential. Knowing yourself and how your own psychology works is key.
Financial Independence will come once you are hyper-focus on all these items. Financial Independence will come once you know what money is in your life and in a society.