Achieving financial independence is one of the most important steps in life. However, reaching financial independence prior to retiring is absolutely necessary. Without a steady income from a job, you’ll need to make sure that you can support yourself with funds that you’ve saved as well as knowing where to invest money and reduce debt. Here are some ways that you can achieve financial independence before retirement.
Get Rid of Debt
There are a number of methods to consolidate high-interest credit card debt. Some of these ways are to get rid of unnecessary expenses, pay back loans, and downsize what you own. Debt, which drains your net worth, is probably what is keeping you from reaching your financial goals.
By cutting down on credit card debt, you’ll be able to become both more financially independent and financially stable. Budgeting and decreasing your debt early on will lessen the amount of debt you will have in the future and help you to become more financially independent faster.
Invest in the Right Places
Investing in broad market index funds will help your portfolio grow to the amount you need. Index funds have more dependable performance and lower costs than other types of investment options. This dependable performance will help you to be able to trust in the returns you will get in the future from the index fund. Since they’ve got a dependable history, you know you can trust them.
If you are looking to invest in more physical assets, gold is a great way to go. It has a fairly stable history and is a well-respected investment. Plus it sounds really cool.
Know Your FI Number
Making sure that you know your FI number is an important step to financial independence. Your FI number, or financial independence number, is found by multiplying your annual expenses by 25. Your FI number will allow you to live off 4 percent of your portfolio. But what exactly does this mean? Your FI number is the amount of net worth that you must reach before you can be considered financially independent. You have to know this number in order to know when you’re officially independent or not.
Reaching financial independence is something that you can start to do at any age. However, just because you can start it whenever doesn’t mean you should wait too long. There are many things you can do now to start investing in yourself and your future that will help you to save for retirement.
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