Financial independence can be achieved early in life only if one follows a set path, exercises a great deal of discipline, and lays down clearly defined goals.
A rudimentary action plan for achieving financial independence would involve the following issues:
- Acquiring a job commensurate with one’s qualifications.
- Beginning to save money from day one.
- Targeting steady promotions and pay increase.
- Increasing one’s savings rate gradually.
- Using dollar-cost averaging (DCA) to boost investments.
- Going for the jugular in a bullish market.
- Landing the targeted savings fund.
- Retiring blissfully at the correct time.
Following this sequence perfectly would be classified as a dream run, but there will be many pitfalls that will break the journey in patches.
Early savings are the key to financial independence
When there are only two to tango a two-roomed rented accommodation feels like heaven. At this stage the IRA contribution can be started while expenses remain on the lower side. How long you can stretch “couple-hood” is vital to your financial stability as you get the opportunity to save a good amount while keeping expenses under control. With the arrival of children “parenthood” imposes newer responsibilities and bigger expenses that will gradually lower your savings rate, sometimes eliminating the potential to save. Children require a larger home and there will be schooling expenses combined with bigger outlays in food and clothing and medicine.
Lavish lifestyles can’t guarantee financial independence
When we are younger we tend to view savings as boring and mainly a responsibility that can be postponed till we mature in age and experience. The predominant urge in youth is to earn money through sheer hard work and to party even harder and spend to accumulate luxury items as quickly as possible regardless of the consequences.
You may justify spending by taking the view that savings and investments don’t guarantee sufficient returns and that what you buy today compensates you handsomely for the dollars you dish out. The problem begins when purchases are financed by loans and credit lines that become expensive to repay.
The more you fuel debt the further you move away from financial independence
High expenses need not necessarily be the prerogative of high income groups. The desire to spend money on coffee, alcohol, soft drinks, fast food, fast cars and expensive mobiles cuts across all strata and credit cards are fueling consumerism to the detriment of our savings habits and financial prudence. Our life is increasingly geared to servicing debt. Our standard of living remains higher but at the cost of quality of living.
How we can avoid major pitfalls and emerge financially independent
- Increasing your savings proportionately as your income grows and keeping expenses within levels that you can afford.
- Keeping your needs minimal and your wants under tight control so that they don’t push you into debt early in life.
- Keeping a budget for handling cash in the short term and a realistic investment plan to look after you in the long term.
- Using savings effectively to grow a 401k or IRA plan, starting as early as possible.
As you continue being faithful to these core strategies you will realize that true financial independence is possible if you sever the umbilical cord that seeks to connect you always to the debt generating loans and lines of credit.
If there was one exception to what we have stated about debts it is the cash loan for title. Unlike many other short term loans like payday loans, the auto collateral loan relies exclusively on the collateral of your car title documents, and helps you raise a substantial amount equivalent to almost 60% to 70% of your vehicle’s commercial estimate. The car equity loan unlocks the maximum equity in your car at the most competitive interest rate of 25% APR. The loan for vehicle title can be repaid smartly in lower amortized installments that can be modified to match your salary income. The pawn car title loan amount can be profitably used to consolidate unsecured debts and free you from the burden of high interest “mistakes” you may have accumulated in your life.