{"id":34300,"date":"2023-07-11T16:25:24","date_gmt":"2023-07-11T20:25:24","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/why-should-you-become-financially-independent\/"},"modified":"2023-07-11T16:25:26","modified_gmt":"2023-07-11T20:25:26","slug":"why-should-you-become-financially-independent","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=34300","title":{"rendered":"Why Should You Become Financially Independent"},"content":{"rendered":"
\n

Do you want to retire in comfort? What does that mean?<\/p>\n

Everyone has their own vision of what a comfortable retirement looks like. But there is a common thread you share with all of them. To retire with ease requires something akin to financial independence. This is the ideal. This is where you don\u2019t ever have to worry about where the next dollar will come from.<\/p>\n

\u201cBeing \u2018financially independent\u2019 means being in a state where one has acquired enough wealth, assets, and income to sustain their desired lifestyle without depending on external sources of income,\u201d says Melissa Terry, a CFA
\n CFA
\n <\/fbs-ticker> at VEM Tooling in Kenner, Louisiana. \u201cIt also means having the financial freedom and security to cover essential expenses and long-term goals without relying on a regular job or others for financial support.\u201d<\/p>\n

Why is it hard to become financially independent?<\/h2>\n

The National Council on Aging says \u201croughly 1 in 3\u201d seniors are economically insecure. They define this as anyone with incomes below 200% of the Federal Poverty Line. Your common sense tells you the numbers are even worse when it comes to measuring financial independence, which likely requires an income well above what the Federal government considers the poverty line.<\/p>\n

\u201cDetermining if one is financially independent requires assessing several factors,\u201d says Percy Grunwald, technical lead at Cisco Meraki in San Francisco. \u201cFirstly, it involves evaluating whether an individual\u2019s passive income, such as returns from investments, rental properties, or business ventures, is sufficient to cover their expenses. Additionally, having an emergency fund to handle unforeseen financial challenges is crucial. Secondly, one must consider their ability to sustain their desired lifestyle and future financial goals without relying on employment income. Finally, being financially independent entails having a well-thought-out financial plan, which includes retirement savings, investment strategies, and a comprehensive understanding of personal finances.\u201d<\/p>\n

<\/fbs-ad><\/p>\n

A recent study by Paychex shows that \u201c55% of retirees went back to work because they needed more money.\u201d It is hard to become financially independent when you need a paycheck from somebody else.<\/p>\n

\u201cIf you rely on an outside source of income, such as a salary from a job or government assistance, you\u2019re not truly financially independent because you\u2019re dependent on that source,\u201d says Eliza Arnold, Co-Founder & CEO of Arnie in San Francisco. \u201cShould it disappear, you could be in a bind. True financial independence means your assets\u2014like your investments or businesses you own\u2014are generating sufficient income for you.\u201d<\/p>\n

Aye, there\u2019s the rub. While the definition of true financial independence varies from individual to individual, you can certainly know when you\u2019re not financially independent.<\/p>\n

\u201cTrue financial independence is compromised when an individual relies on any outside income source other than their own investments or businesses they own,\u201d says Grunwald. \u201cWhile income from non-owned businesses or government support might provide temporary relief or supplement one\u2019s finances, it introduces a level of dependence on external entities. Relying on income from sources outside of personal investments and businesses may lead to a lack of control over one\u2019s financial destiny. True financial independence is achieved when an individual\u2019s wealth and assets generate sufficient income to sustain their desired lifestyle without relying on external sources, providing them with greater control and security over their financial future.\u201d<\/p>\n

The point you become financially independent<\/h2>\n

If you know what financial independence isn\u2019t, how can you tell what it is? Well, here\u2019s a twist: It is possible to both work and be financially independent.<\/p>\n

\u201cThere are different ways you can measure yourself to be financially independent,\u201d says Eric Mangold, founder of Argosy Wealth Management in Parsippany, New Jersey. \u201cOne way is if you are working, are you working because you want to or because you have to? If you are working because you want to, not because you need the income, that is one way to know if you are financially independent.\u201d<\/p>\n

Indeed, perhaps the most practical measure of financial independence is your relationship with working.<\/p>\n

\u201cYou know you\u2019re financially independent when your passive income\u2014money that comes in without you having to actively work for it\u2014covers your living expenses,\u201d says James Allen, the founder of Billpin in Los Angeles. \u201cIt\u2019s when you wake up in the morning and realize that you don\u2019t have to work to keep the lights on; your investments are doing that for you.\u201d<\/p>\n

Two steps you can take to become financially independent<\/h2>\n

There are two avenues available to you to achieve financial independence on your own (that is, without inheriting it). You can save your way to wealth, or you can sell your way to wealth.<\/p>\n

\u201cCreate regular savings programs to build an asset base and acquire assets that will generate income (annuities, rental properties, etc.) and aggregate to contribute toward independence,\u201d says Michael Kazakewich, partner and advisor at Coastal Bridge Advisors in Westport, Connecticut. \u201cUnderstanding the attributes and risks within your portfolio can also help contribute to financial independence. Secondly, have a clear financial plan to achieve your vision of financial independence, and regularly revisit where you are in relation to your goals.\u201d<\/p>\n

\u201cFinancially independent people tend to have some common traits,\u201d says V. Henry Astarjian, managing director at Waterstone Advisors, LLC in Walpole, Massachusetts. \u201cThey rely on themselves and their talents. They educate and train themselves in order to become useful to others. They understand that offering products or services that others want is the key to their own financial success. And they value financial independence as a thing on its own.\u201d<\/p>\n

The path you choose will depend on your nature. Either way, you might say it is your duty as an American citizen to keep striving toward financial independence. Our Founding Fathers would agree.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Do you want to retire in comfort? What does that mean? Everyone has their own vision of what a comfortable retirement looks like. But there is a common thread you share with all of them. To retire with ease requires something akin to financial independence. This is the ideal. This is where you don\u2019t ever […]<\/p>\n","protected":false},"author":1,"featured_media":34301,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-34300","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-featured"],"yoast_head":"\nWhy Should You Become Financially Independent | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Do you want to retire in comfort? What does that mean? Everyone has their own vision of what a comfortable retirement looks like. 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