The surest path to financial independence.
We all should aspire to achieve financial independence, which is having enough resources to live comfortably for the rest of our lives. Having that kind of security and stability, rather than living paycheck to paycheck, offers many benefits including peace of mind and the freedom to spend our time as we see fit.
What is the best way to work toward becoming financially independent? It’s natural to assume that you need to make a high income, but it turns out that’s not true. Regardless of your income level, you start building the wealth necessary to become financially independent by consistently living beneath your means. Simply put, you need to spend less than you make.
Here’s a simple way to see how you’re doing on a monthly basis:
- Determine your monthly net income. For an individual or a couple, this would be your take home pay, or the amount of your monthly pay after deductions for taxes, benefits, etc. [NOTE: If you are contributing to a retirement account out of each paycheck, congratulations, you are already building wealth!]
- Determine your monthly expenses. Add up what you spend on your mortgage payment or rent, groceries, gas, water, electric, cell phone, internet, TV streaming services, car payments, eating out, gasoline, insurance (include monthly amounts for car, home and life insurance), and any other expenses you regularly incur.
- Subtract your expenses from your net income.
If your monthly net income – monthly expenses = a positive number, you are living beneath your means and able to build wealth. [Again, if you are contributing regularly to a retirement account out of each paycheck, you are already building wealth.]
If your monthly net income – monthly expense = a negative number, you are spending more than you earn and will be unable to build wealth under these conditions.
Living beneath your means is a first and essential step toward achieving financial independence. Contact us if you want to learn more.