Financial Independence
Does being “Financially Independent” mean being enormously rich? Having crores of rupees in your bank account? Having huge investments reflecting in your demat account? Having many immovable properties? Owning multiple businesses? Probably not.
It is possible to become financially independent without having any of the above.
Having lot of Wealth is not the same as having financial independence. In fact, achieving Financial Independence is having the power to create wealth, the way you want, the way you love it, using means and doing things you are passionate doing.
When a person is having sufficient means to lead the rest of his life without having to “work” for it, he can be said to have become financially independent. To quote Robert Kiyosaki - Financial Independence is about having more choices. Having choice as to what work to do. More importantly not being required to do a work which you are not happy doing. Or doing something you are happy doing, without worrying whether the task would compensate you suitably. A financially independent person takes a financial decision based on what makes them happy instead of what earns them more money.
Different people attain financial independence at different points of time in their life. To some it may come in their 30s, some in their 50s and to some it may not come at all.
The concept of FIRE (Financial Independence, Retire Early) has become very popular especially among the younger generation of late. After retiring from active work at the age of 35 or 40 the person may not necessarily quit working, they may take up some hobby or passion which they may have been wanting to do all their life but could not do so far as it would not have paid them sufficient money.
Becoming financially independent is a dream to most of us.
To realise this dream, the first step is to become financially independent on a mental level. More often this happens much before one even desires or becomes aware of what financial independence is. This could come from any source, an article one reads or attending a lecture or discussion with a financial advisor. This then builds up into a desire. The person then starts giving it a shape. He fixes a goal and decides on a game plan to achieve or reach his goal. At this stage it is advisable to take help from a qualified and experienced professional who can help you to reach the goal in the best possible manner. Having a professional on your side will ensure that among several other aspects, they help you to maintain focus even during difficult times. A sports person realises that training with a coach is the best way to become a professional.
On a more practical side, a person is said to have become financially independent if he is able to generate more passive income compared to his living expenses.
Some common examples of passive income are Interest / dividend on financial investments, rent on investments in immovable property, royalty income for authors, renewal income for financial advisor.
With practice, it is possible for an average person who does not earn huge money to reach this stage. What he requires is a sense of self discipline. He should have the discipline to set aside a portion of his income and invest the same in such assets or means which in turn generate a regular cash flow which is greater than his regular expenses.
But as we have heard it being said several times, it is not as easy as it sounds. The formula is simple, set aside the money and invest in assets that generate regular cash flow. Why it is not easy? Because it is very difficult to be “in control of our money”.
Money has several dimensions to it. Some of these are earning, saving, investing, protecting, budgeting, insuring, etc. When dealing with money in each of its dimensions as mentioned above, it is important to have a control rather than allow it to take its own way. If you are not in full control of your money while dealing with it then it will control you and you will never be able to achieve financial independence.
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