Financial Independence- what does this term mean to you?
Does it mean not having to work for someone else? Does it mean being able to quit a job you don’t like? Does it mean sitting on the beach with a drink in your hand? There are a wide variety of things this phrase could mean to you depending on your current situation in life, but a good basic definition is that it is the state of having sufficient personal wealth to live, without having to work actively for basic necessities.
According to a highly regarded psychology theory called Maslow’s Hierarchy of Needs, by nature, all people need to satisfy their physiological or basic needs first. This includes things like making sure they have a roof over their head, or that they have food on the table. Until these needs are met, a person will have a hard time focusing their energy on anything else. But once these needs are met, then safety naturally becomes their next priority and their new area of focus. Safety not only includes personal security, or avoiding physical threats, but it also includes financial security. In other words, once someone has secured their basic needs, it is natural for them to start to think about one’s long term financial security. Financial Independence is a means of doing this.
So how does one achieve financial independence?
Achieving financial independence could be as simple as winning the lottery or gaining an inheritance. However, for most people, those simply just aren’t realistic methods for gaining one’s financial independence. Consider for example a recent Mega Millions lottery drawing. The total jackpot was over $350 million dollars, more than enough to get the average person to financial independence, even after paying out half of that in taxes. But the odds of winning that jackpot were 1 in 258,890,850. Here are some things that are more likely to happen to you than winning the lottery:
Winning an Olympic gold medal- 1 in 662,000
Being crushed by a meteor- 1 in 700,000
Becoming an astronaut- 1 in 12,000,000
You saw that right, you are significantly more likely to become an astronaut than you are at winning a major lottery jackpot. Let’s just go ahead and scratch lottery off the list of things that are going to make you financially independent. It just isn’t going to happen. And while we’re at it, unless you are already aware you that have a very rich relative who is likely to provide you a healthy inheritance, let’s scratch that off too. Neither of these are realistic ways someone can gain financial independence. So how are you going to get there?
Be pragmatic, use proven methods
If you truly want to become financially independent, you need to map out a path that is realistic and achievable. It’s not going to be easy, but in short, you are either going to have to save your way to financial independence, or you are going to invest your way there. For most people, it’s going to take a combination of both.
If you are spending beyond your means, you’re not going to get there. Like a business, you need to get yourself out of the red before you can start to grow. If this is you, the first step is to right your financial ship. Cut out unnecessary expenses and reduce the ones you can’t cut out completely. You’re going to need to free up this cash to use for your investing activities. We’re going to spend time later talking about some of the expenses most people have that can be easily cut or significantly reduced.
The next step on the path to financial independence is to start investing. Real Estate is a great vehicle for building towards financial independence, and here at the Real Estate Investor Forum, we spend a lot of time talking about this. Using real estate, and the power of leverage, many people have achieved their own financial independence.
How would you like to watch as someone does just that? Would you follow along, and use their experiences to help you avoid making mistakes on your journey? Would you take the initiative yourself to start on the path toward financial independence?
Recently, a member of our community reached out to us to share her thoughts on financial independence. It seems as though she is now on a mission to achieve it, and is using real estate investing as the vehicle that will get her there. She’s been following the Real Estate Investor Forum in preparation for getting started, and things are ready to move forward. Her journey will be a long one, but we’ve asked her to share her story with us as she prepares to head out on that path. And from what we’ve heard so far, we expect that what she has to share will be inspirational to say the least. As she progresses down this path, she has promised to talk about what she is doing and the challenges she encounters. We will share her experiences with you.
Stay tuned, as we expect her first report out any day now. We’ll share it on our site as soon as we get it, and if you too are also seeking financial independence, take notes. You might want to follow a similar path.