Independence Day is celebrated in America every year on July the fourth. This is typically a time of eating cheeseburgers, spareribs, and chicken at backyard barbeques while lighting fireworks. The fourth of July is a great time to declare your financial independence. Make this year a time to develop a life plan that will allow you to live a financially comfortable existence without stressing over bills. Follow these four keys to financial independence.
Develop multiple streams of income
Develop multiple streams of income to generate income on a monthly basis. Remember that your job will not make you rich! Unless you have a career that generates an absurd amount of income, it is highly unlikely that you will become wealthy from your primary occupation. This is why it is so critical that you develop both active and passive income streams. Active income is income you work for and passive income is income that requires no effort on your part. Dividends are a great source of passive income. This additional income can be used to fund your wealth building goals.
Control your spending
Anyone can outspend their income. Even a millionaire can go broke. Just because you make a lot of money does not mean that you should spend a lot of money. It is critical that you learn to live within your means. This means avoiding luxurious trips, lavish dinners, and expensive purchases until you have a significant safety net. You cannot afford to do any of these things until you have at least $10,000 in investments. Keep it simple until you have a core base of $10,000 in either stocks, bonds, mutual funds, cash, or other securities.
Be willing to take some risk
In order to achieve financial success, you have to be willing to take risk. You cannot save your way to wealth. Blue chip stocks and bonds bring steady returns but not outsized returns. You have to take smart calculated risks to reach success. Individuals who were willing to invest in Apple, Amazon, Netflix, and Tesla during the early stages have been richly rewarded. This means being willing to ride out the ups and downs of the stock market roller coaster. Great companies do not just shoot straight upwards. There are highs and lows before ultimately achieving success. Be willing to ride out the roller coaster.
Develop a long-term perspective
If you want to get rich quickly, then you need to play the Mega Millions lottery or win the million dollar jackpot at Texas Hold Em. The stock market is not a casino. Investing is about building wealth over the long-term. There are times when you can make money quickly but that’s not the focus. Buy companies that you believe in. Only invest in companies that you are willing to own over a five to ten year time period. This will keep you from investing in junk companies that will lose your money. Evaluate the performance of a company on an annual basis and not day by day. If you go into it with a long-term investing perspective, you will come out ahead.