How Much Money Do You Really Need To Be Financially Independent? When it comes to money in today’s world, you can either be financially stable or not, this has caused a lot of people to be inquisitive about the amount of money they really need to be free from the constraint of instability in finances.
Understanding this is very crucial as money is a non-optional day-to-day part of our lives regardless of profession, age, country, and status. If you want to know what financial independence really is and how much is needed to be independent in your finances, follow tactically as this is the main purpose of this article.
How Can I Know I Am Financially Independent?
Yes, anyone can be financially stable depending on how money itself is used, there are ways to know you’ve reached the point you are not dependent financially on a traditional measuring scale, the two major ways are:
- When you have enough money saved up on your annual living expenses, i.e you have 25 times of it to fall back on even when not working.
- The other way is how much you can retire on or rely on when not in active work. How much money you can use as a retiree each year, otherwise known as the 4 percent rule.
Knowing your financial independence is relative, it’s different for all-Cause income generation, time, situation, and goals differ. The basis of financial stability can be calculated when these things are put in place:
- When your income is more than your expenses, it doesn’t always have to be the size of the money, but how much you can use and hold. For example, a person earning $100 and spends $20 is financially stable than the one earning $200 and spends $180 out of it.
- When you have different sources of income and investments that can keep you going for as long as possible such as investing in real estate, side-businesses, and earning money at the comfort of your home.
How Do I Become Financially Free?
The path to financial freedom/stability is such that requires wisdom, there are some rules you can follow to have enough to be stable in your finances. I will give you some of them below:
- You must have a long-term financial prospect, this will help you maximize your time, money and see better opportunities.
- Start to save up and invest by opening a savings/investment account. Having a saving mentality enables you to have the money to invest on such as getting land, opening a shop, getting a skill e.t.c which will then bring returns.
- Don’t spend money on liabilities especially when you’re just started, just like getting a car is needless when your place of work is a few distances from your home and you don’t really need it, so acquire assets that can multiply the money at hand.
- Don’t live above your present income, and as much as possible avoid loans and debts.
Using these aforementioned factors, you should be able to know when you’re financially free and how much is needed.