Have you ever thought about accumulating enough wealth to generate an income stream that will allow you to stop working? Perhaps you feel inadequate or don’t believe you deserve to be free from needing to earn a paycheque. Thoughts of I’m not worthy! I’m not worthy! run though your head. Well, I’m here to say you are worthy of financial independence and living the life you have always dreamed of.
Let’s look at the speed bumps to financial freedom and ways to avoid them:
Do you feel guilty about accumulating wealth? Does the thought of being rich make you feel uneasy? This may be a feeling you adopted in your past from family or friends. Thoughts of financial independence may be foreign to you.
Some people look at all the poverty in the world and say they could never be wealthy because there are so many people who have so little. Think of it this way: the more wealth you have the more people you can help – and – once you’re wealthy enough you can teach others to be wealthy too. Wealth is relative and different in every country. Owning a house in some countries is not necessarily possible, but someone can still aim to be financially independent and enjoy life more.
Not understanding the definition
Understanding the true meaning of financial independence is important. It means having enough wealth to create an income stream that pays for your lifestyle so you don’t have to work.
When I ask people to define financial independence, a lot of time they say it means having or earning a lot of money. This is only partly true. In reality, financial independence is more than being rich or earning a lot of money; it’s about improving your financial condition.
Not taking saving seriously
David Bach, author of The Automatic Millionaire, says most people don’t have an earnings problem, they have a spending problem. And, their spending often increases with their earning level. It’s a rare individual who spends below their earnings and also saves. Our society is very consumer-oriented and a lot of people get caught in the ‘live now and save later’ philosophy. This is one of the largest roadblocks to achieving financial independence. If you don’t take saving money seriously, you’re preventing yourself from increasing your net worth and improving your financial condition.
Thinking you don’t earn enough to become financially independent
If you don’t believe you earn enough to become financially independent, you’re suffering from one of the following conditions:
- You don’t know how much you need to save to be free
- You’re paying down debt and don’t think you can save money
- You don’t know the true definition of financial independence
- You’re living beyond your means.
The old phrase “If there’s a will, there’s a way” applies here, so reevaluate your lifestyle and see where your money is going. David Bach’s “latte factor” formula is a good way to do this. A lot of people think they don’t earn enough to save, then find they can after evaluating where they’re spending their money.
Those earning a low income and truly unable to save may need to increase their income with a second job to be able to save.
Thinking you have too much debt
Because we live in a consumer-oriented society, a lot of people fall into the trap of using credit cards to pay for vacations, emergencies and unnecessary purchases and they accumulate debt instead of wealth. Credit card consumer debt is a plague on our society and a real roadblock to financial independence.
Some people I talk to say that they’ll start saving once they’re out of debt. Sadly, a lot of these people never seem to get out of debt because they have no emergency fund in place, so if an emergency arises they have to use their credit cards again to rescue them. Even if you’re still paying down debt, start an emergency savings account and grow money in a mutual or segregated fund. Then, when a life event happens, you can use your emergency fund instead of your credit card.
Controlling debt is one of the foundations of financial independence If debt controls you, becoming financially independent may never be in your reach. I recommend becoming completely debt free and if you do use credit cards, pay them off right way so you don’t have to pay any interest.
Living beyond your means
A few years ago, I asked my father for a few words of wisdom before I went on a vacation. He simply said, “spend less than you earn.” This was a profound statement that has stuck with me over the years. A simple concept, yet some difficult for some who are driven by consumerism and having the latest technology or latest car. This is not the way to become a millionaire or achieve financial independence.
If you believe in something enough, you’ll do everything in your power to achieve it. Believe me, the road to financial independence means not doing what some of your friends are doing and not attending certain events. This can be very difficult and it may require you to build other friendships. After all, once you’re free from work, some of the friends you have now may not be able to do everything you can once you’ve found your financial freedom.