Let’s talk about money. The driver of modern day society, and the shackle of many.
College students choose their major based on which earns the most of it, and adults stay at jobs they hate just to it.
It has become the ultimate dictator, and we need to escape its control.
You can do this by achieving financial independence.
This term is commonly misinterpreted by young adults who believe buying themselves a pair of Nike sneakers at Footlocker or the new iPod Touch warrants a collective round of applause. Although it is commendable to save enough money to buy the aforementioned items, complete financial independence is a tad more complicated than that.
Finding that amicable balance between your expenses and income is the backbone of financial independence. You may make $10,000 a week but if you spend twice that during the same time period, you are still classed as dependent.
“Live within your means” is a cliché phrase peddled by most motivational speakers and, if you actually think about it, all they are alluding to is financial independence. If you can manage to cater for all your essential, and recreational, expenses without running your income to its last cent, you are well on your way to financial liberation.
Why Financial Independence?
Most people do not have to ask this question, and if you do, you may already be, unbeknownst to yourself, financially independent.
To better understand why financial liberation is important, let’s take a look back at your days as a college student. As a young adult in university, you probably moved out of your parent’s home and ventured out to live either in personal accommodation or the university hostels.
The new found freedom allowed you to live life as you wanted. However, your bank balance hindered the scope of activities you could actually undertake. Many students can relate to skipping a meal or two just so they could afford to pay for drinks on a night out with friends, or even worse, spending countless hours on the phone begging their parents to top up their limited allowances.
Herein lies the beauty of financial independence. Once you have complete control of your money, you do not have to be at the mercy of anyone, or make sacrifices to do what you want. Financial independence is how you can start to live life on your own terms.
In a more mainstream example, low level employees basically live in shackles, tip toeing around their boss’s ideals so as to get appropriate remuneration. If you step out of line, you could get fired or even have a chunk of your salary slashed for inappropriate workplace behavior. Basically, you are a puppet dancing to your employer’s tune.
On top of that, dependence breeds a limited contribution capacity.
After all, who is willing to challenge their employer when one flick of his/her wrist can leave you jobless. All things considered you are living hand to mouth, and your boss ensures your hand stays full.
With financial independence, you can dictate the terms of your employment, contribute effectively and not spend every day worrying about impending joblessness. Who wouldn’t want that?
Attaining Financial Independence
When most people talk about financial liberation, they tend to accompany it with ideas on how to start an entrepreneurial career. In my opinion, this rationale is slightly unidirectional.
Do not get me wrong, an entrepreneurial mindset may lead to a stable income and financial independence, however, it is not the only way to achieve it.
Trendsetting businessmen such as Elon Musk have secured their financial status to the point that they do not have to look over their shoulders when bills come around. Their independence is essentially airtight.
However, a closer look at small scale entrepreneurial startups reveals an unfortunate conundrum plaguing most people today. They rush into starting up businesses with a questionable probability of success, only to find themselves swimming in debt, trying to keep their organizations afloat.
Entrepreneurship is never rosy though, even if you run a behemoth such as Tesla, ask Elon himself, but for the regular middle class citizen trying to startup Joe’s Hardware Store, the waters are even choppier.
This is why attaining financial independence has to be considered as a process, with multiple steps and not a quick fix achieved through entrepreneurship; to be cliché again, it’s a marathon not a sprint.
If you decide to proactively strive for independence, the most important thing for you is knowledge. Gain a basic knowledge of all possible investment opportunities before venturing into any one of them. If you’re like most working class folk, you’re working eight or more hours per day for your paycheck, so don’t fling it at investment idea’s you know little about.
Most financial opportunities fall into one of the below catgeroies:
- The Financial Markets (the stock market, futures, currency trading, etc)
- Asset Investment (such as property investment)
- Business Endeavors (entrepreneurship or startup investment)
All these options can lead to financial independence, but just remember, even blue chip stocks have risk. Nothing in life is guaranteed.
Asset investment may be likened to saving your money in the bank. The only difference is that when it comes to assets, there is a chance of value fluctuation. Your chosen asset may rise in value, thereby bringing a return when the asset is liquefied.
Startup investment, unlike straightforward entrepreneurship, can be a safer bet depending at which stage in the business you invest in it.
Let’s say your brother decides to start a company. He does all the due diligence and registers the organization in his name. Up until that point, he has done all the heavy lifting. Additionally, only his capital has been used up in kick starting the business. However, a month later, his business is yet to turn a profit but product is moving, so he asks you to invest in it to enable him to refill his inventory.
If after reading the financials, you see a clear path to profit, all you have to do is provide a small injection of capital, after which you reap the rewards once the profits roll in.
Of course naysayers may ask “What if the business doesn’t generate profits?”, and again, nothing in life is guaranteed. But still, you will have invested only a small amount of capital, so any losses will not be as hard to accept.
Some investments like the above can be almost no-brainers, so keep your eye out for them. Though such opportunities are rare.
Escape the race
Without a proper strategy and plan, you’ll always be dependent on someone else. Whether’s its your boss, or your friend to grab your tab when you’re dead broke, it’s not a nice situation to be in.
So do the smart thing and research further into financial independence, and if you choose to invest for a securer future, remember that risk and rewards are opposing forces, so do wisely, at your own tolerances.