Welcome to my first post of Motivational May Series. Check out the main post for the details and schedule of Motivational May series. In this post, we will be talking about Financial Independence, which is the goal set by my fellow blogger Ray. On her Blog The Ray Journey she shares her experience of working towards her goal of financial freedom. After sharing some basic information on the topic of financial independence you will learn more about it with the insightful interview of Ray about her journey towards financial independence.
Financial Independence Definition
Financial Independence means to have enough investments with steady monthly financial outputs that it covers all your monthly expenses at a minimum. This would mean that you will not have to work another day to earn money for affording your lifestyle and instead you can focus on things which are important to you like family and passions. Doesn’t it sound like a dream come true or maybe even too good to be true? Believe me or not there are many people on this very same planet who have achieved financial independence and are enjoying life without the stress and hassles of working to earn money.
At the end of this blog I have shared an interview with a fellow blogger who has firsthand experience of the journey towards financial independence and has shared very openly and given some really solid and honest advice, so please read till the very end.
Now let’s have a deeper look on this fantastic idea.
What does Financial Independence really means?
If you own a business that is earning great money and is allowing you to afford your lifestyle, does it mean you have achieved financial independence? Depends, if you also need to manage and supervise your team/employs this means you are working and are not financially independent, you still need to work to earn. Financial independence essentially means you do not have to work to afford your lifestyle.
On the other hand, if you own a share in the business as a sleeping partner, and it’s giving you a handsome amount of money to meet up your monthly expenses then you are financially independent. A sleeping partner means someone who has made a share of financial investment but will not be working to run the business. Let’s say you made an investment in a coffee house but you will not have to supervise the business and still it is making you able to afford your lifestyle it means you have achieved financial independence.
To Get Rich vs. Financially Independent
A financially independent person is not necessarily rich, he may be making a moderate amount of money from his passive income sources, just enough to cover his expenses while living a minimalistic lifestyle and not having to work for paying his bills. On the other hand, anyone who has enough money to support a lavish lifestyle is rich. The main difference between being rich and being financially independent is that even most rich people have to work for staying rich. However, a financially independent person knows better and does smart work to get to the point where they do not have to work to support his lifestyle. Problem with most rich people who are not financially independent is they do know how to earn well but they do not know how to accumulate wealth for staying rich and retiring early.
Good News is you could be both rich and financially independent at the same time if you use the right strategy (best case scenario).
For accumulating any amount of wealth you need to have a plan. Planning is very important, but your plan should be very realistic and customized. This means you need to design a road map to financial independence based on your own statistics of income and expense of living. Once you have a plan it is very important to stick to your plan because gaining financial independence is all about the mindset.
Gaining financial independence is no rocket science; you design a customized plan for saving money and then investing that money in something that will generate you a steady passive income. Keep growing your saving and passive income until you are able to pay all your living expenses from your passive income without withdrawing from the principal amount.
If it really is that simple, why don’t you see more people gaining financial income? It’s because as simple and desirable the idea is, most people do not have the right mindset for it. Rich people want to keep upgrading their lifestyle, the more money they make, the more expensive their lifestyle gets and this does not help to gain stability. They do not have the patience required for growing slow and steady, or they are not willing to take the risks which are involved in businesses. Some find it hard to trust others enough to invest their hard earned money into someone else’s idea. There are people who are making huge money but are just unable to make any savings at all because they are bad at budgeting and money handling. If you have any such issues, you need to work on them first.
How to become financially independent?
There are two ways of achieving financial independence. One is to grow your passive income to help you pay for all your monthly expenses. Other is to cut on your living expense and downsizing your lifestyle to fit into your small passive income. Either way, you still need a passive source of income which is steady and helps you pay all your monthly expenses every month!
How to save money?
To make an investment, you first need to have savings that you can invest. If you already have some savings to get you started, great for you but how to save money while you already making barely enough each month? Well, obviously you need to cut down expenses and be very careful about where you are spending money. You need to carefully analyze the goal you have set for yourself and when do you want to achieve it. Divide the total amount of money you need to save on the total months you have till your deadlines, you will know how much you need to save each month. Once you know that, craft a saving plan and see where in your monthly expenses you can save. Here are some helpful tips for saving money.
- Look for cheaper options whenever you can this includes everything from renting living space to shopping
- Spend only on essentials
- Stop eating out and learn to cook
- Cut out on partying out if you do that a lot
- Alcohol is expensive try to cut out on that too
- If your income grows do not upsize your lifestyle or you will not be able to save
- You can also take up a part-time job and make the extra income count as saving.
Here is a very detailed step-by-step guide post on How to Save Money So you can Retire Early. I highly recommend you read this post and take notes from it so you can really start your journey of financial independence, after all, you need to save before you can invest.
Where to invest your money for passive income?
Once you have gathered up some saving and think you have enough to invest somewhere, it’s time to decide where? Where would you like to invest the money you have worked so hard to save? Do your research, the more research you do the better idea you have of the market. My advice is you do not need to and should not wait for saving heaps of money. Start small. Try to make several small investments in different sorts of businesses, because you do not want to put all your eggs in one basket. When you are sure about the outcome of each investment you can invest more in the business which is yielding you better profit. Remember it’s the money you have worked hard for so do not make hasty decisions and avoid impulsive investments. Following are some ideas for passive income.
- You can literally invest in any business as a sleeping partner to have a passive income.
- Or you can buy a property and rent it out.
- You can also give your property on lease for a longer time period and invest the money further in any business.
- You can also buy an early retirement plan.
Interview With Ray
To get more information on this topic, I requested Ray for an interview and she agreed! She is a telecom-engineer-turned-writer who blogs about her one-year journey towards achieving financial freedom through passive income sources; and how to lead a healthy and productive life while doing so. Please visit her blog The Ray Journey and follow her on her personal and official Twitter accounts. Please read a thoroughly informative and motivating interview below.
Q: 1: What does financial independence mean to you?
Ray: To me, reaching financial independence is living a life that is not conditioned by my ability to go to a job I hate simply to make a living.
It means I can enjoy life and practice what I love while still able to live comfortably through passive income.
Q: 2: What set you on the path of financial independence?
Ray: Well, this whole thing feels like it probably started on a bad day at work, I guess?
No, um, honestly, I can’t quite remember the very first thought that triggered this idea; however, I know I reached a point in life where I felt that I had to make a change.
I couldn’t accept that this life was my reality and that was how I was going to spend the rest of it.
I looked at myself and felt all kinds of negative feelings, I felt sorry for myself, felt disappointed, felt angry, felt like I have been wasting my life for nothing. I knew then I was not going to spend another day living this kind of mundane and unfulfilling life.
Pursuing a life that I find fulfilling, however, did not necessarily mean it was going to be financially stable. And that was when the idea of trying to figure a way to find financial stability came to me; to have some other means of income that will not cage me into a type of life that I couldn’t stand anymore.
Q: 3: Do you ever get apprehensive and how do you keep yourself motivated towards your goal?
Ray: I do not particularly get apprehensive; I sometimes just wonder if I’ll really be able to make it, but then I ditch those thoughts and realize I am already making it.
Honestly, I am one that has never been able to stay motivated or pursue a goal for long.
I was never able to last long doing anything in my life; not swimming, not Karate, not the piano, not the violin, not writing a novel, not even engineering, my major, couldn’t even hold on to that long enough to get a job or prepare a master.
The fact that I have been able to stay motivated and work on this goal on a daily basis for that long is mostly a changed mindset.
I know that there is no more room for me to waste more time. It is just not acceptable to me anymore.
I know what my goal is, I have it clearly written and I read it every single day. I basically live for this goal.
I created my blog for the main purpose of having that goal set in stone, right in front of me. I have a countdown on my website, so that every time I login, I am reminded that the clock is ticking and I need to hurry.
It literally caused a shiver down my spine the other day, when I was just being lazy, in bed, having one of those mornings where I just don’t feel like doing anything, then I causally went to check my website, on my phone, and the sight of the number of months going down from “8 months left” to “7 months left” made my heart sink. I immediately jumped out of bed and started working on the day’s tasks.
I’d say deadlines are my fuel.
Also, when I created that blog, I started telling everyone I know. And that is completely unlike me, as I do not share anything about my writing or my goals or my work with anyone; however, this time, I was challenging myself in every way I can, to be held accountable by as many people as possible.
This feeling that everyone knows what I am up to and is following how far I have reached, it gives me the push that I need to keep going at it. Part of that is because I don’t want to look like a loser, honestly.
When you make unusual decisions and start pursuing something like this, something that not necessarily everyone around you understands, you attract a lot of doubters and people who are waiting for the opportunity to tell you, “I told you so.”
And I don’t want to be remembered as that naïve girl who wasted an entire year chasing some lame, stupid goal. I was never made to be a joke and I do not plan on becoming one any time soon.
So, yea, this is what keeps me motivated.
Q: 4: When did you start your journey towards financial independence? What goals and timeline you had in mind?
Ray: I started this journey on the 1st of December; that was when I started my blog and published my 1st post.
I don’t really have an exact timeline in mind as in, like, when exactly I will have achieved complete financial freedom because I know something like this can take years to happen. I mean, in my mind, I am hoping somewhere along the lines of 5 years, maybe; it’s still a bit early for me to be able to decide that though.
However, I set up a soft deadline for only one year. Because anything less than that would just seem completely unrealistic, I had a lot to learn, I literally knew nothing about anything.
And setting it up for more than one year would have made me feel too comfortable like there was too much time available. But one year feels too short to be wasting any time doing anything other than focusing on the goal.
What I wish to have accomplished by the end of this year is just to have established a number of passive income sources, not necessarily to have made any specific amount of money, although I do have a saving goal set up, but my main goal when I started this was to just have my foot in the door, you know, have some sort of an initial investment in a number of sources that can hopefully generate money later on.
Q: 5: How far are you in your journey of Financial Independence, both time and goals wise?
Ray: Time-wise, this is currently my 5th month. Goals-wise, well, there are lots of things that I thankfully managed to accomplish through the past few months, however, investment-wise, I have started two main types of investments, one of them is through a local real estate construction company and the other is something similar to a retirement account that provides yearly profits.
These both investments I have started with the least amount of money acceptable, and I literally went all in.
Now, because of how short the period I have allowed myself is, being only one year, whenever I have an opportunity to put my money in anything that can make even the slightest bit of profit, I do it.
I don’t keep any excess amounts of money just hanging in a drawer or in the bank. I am always looking for ways to invest in something.
Q: 6: Can you share the method you are using for becoming financially independent?
Ray: Not sure if I’d be calling this a method, to be honest, but my method is research.
I do a lot of research and learn about all the different kinds of ways that people can make money through passive income sources.
I then study which one of these methods will suit my situation or which one of these I can actually afford at the moment, and I go for that one.
Q: 7: What challenges have you faced so far, and how you coped with them?
Ray: One challenge was losing one source of income I had which was an online store I had on Redbubble. It got suspended without any clear explanations from their end and that was a bit devastating to be honest because I worked so hard and so long on this store until it started bringing in some kind of revenue.
I coped with that by simply moving on. I am currently working on other means to replace that source.
Of course, I will be starting everything from scratch again but, as cliché as this may sound; I believe everything happens for a reason. So, there must be a reason why my work with them had to come to an end at this particular time. Maybe in focusing on other different platforms, I will find a better opportunity, who knows.
Q: 8: Are there any books about gaining financial independence that you think give the right approach and you would recommend to those interested?
Ray: There are two books that I have read recently and which I believe contain a lot of valuable material that could very much set someone on the right track.
The first one is Secrets of the Millionaire Mind by T. Harv Eker, and the other is The Millionaire Next Door by Thomas J. Stanley.
Q: 9: Do you believe everyone can achieve financial independence, if they want to?
Ray: Absolutely! Anyone can do it.
However, it’s not enough for them to just “want to.” Because who doesn’t want financial freedom, really? Everyone does.
But in order to be able to do it, they have to have enough willpower and drive to work for it every single day and not necessarily see any results until later on.
You just need to have the right mindset to achieve something like this.
Q: 10: What message do you want to give to those who want to become financially independent?
Ray: I would say you need to educate yourself. But don’t take too long before you dip your feet into your first investment, because the longer you wait, the more second thoughts you’re going to have about it.
So, just learn enough to know what you are doing and then start your first investment.
And when you start you want to do it gradually, with methods that are known to have fewer risks, such as retirement accounts and the likes.
Also, make sure you have a clear plan. Know what your ultimate goal is and break it down to smaller sets of goals to be able to achieve them easily.
And, last but not least, work on your mindset; know that you are capable of achieving anything if you have enough knowledge and the right mindset to go with it. Don’t listen to people who might tell you that this is a waste of time, or things like, “if it were that easy, everyone would be a millionaire.”
Well, it is certainly not easy, but that doesn’t mean you’re not built for it.
Thank you so much, Ray, for taking out time and sharing this very beneficial information with my followers. We wish you good luck on your journey.
I would also like to thank my loyal readers who have kept reading until the very end of this very long post. I hope you find this helpful and informative as Ray and I have tried our best to give you as much information as possible.