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Achieving Financial Independence

By Kim Robson

What would you give to become financially independent? It might seem like a far-off dream, but there are many simple steps one can take to realize this very achievable goal.

First, obtain a free copy of your credit report and take a hard, unbiased look at it. Are you carrying any credit card balances? If so, pay them off as soon as possible. Even if you can afford to pay only one dollarmore than the minimum, DO IT. Paying down your principal balance will make a huge difference in the amount of interest you pay over time. For example, with a balance of $5,000, at 14% APR, and making only minimum payments of 2% of the balance, it would take 22 years and $5,887 in interest payments to pay off this debt. Increasing the payments to $125 a month would pay off the same amount in less than six years and cost only $1,775 in interest.

How many credit cards do you have that you never use? Retail stores often offer steep discounts with a credit card sign-up. We pay them off and forget about them. Close those unused accounts. They drag down your credit score. Any credit cards you do use should be paid off in full monthly to avoid incurring interest charges.

Your wealth should be measured by the amount and quality of time it takes to maintain your standard of living. If you had to stop working right now, how long could you keep up your current lifestyle – housing, food, utilities, clothing, and entertainment? Having control over your time is what true wealth means. Do you get to do what you love every morning when you get out of bed? If not, you are not successful. You are merely a highly paid wage slave.

The key to wealth is not a high-paying job. The true secret to increasing your net worth is to spend less than you make. This is a fundamental, absolute, non-negotiable reality of money. Frame it for your wall. The average person doesn’t understand why the more they earn, the more financial independence and security continue to seem always just out of reach. Learning to be happy within your means is one of the best tricks to living well, no matter what your income is.

Be smart about where your money goes. The terrible shame is that the poor generate income which is mostly taxable, while the financially independent generate large unrealized gains in the form of legal tax shelters such as real estate appreciation, capital gains, and tax-advantaged or tax-free accounts such as a Roth IRA or 401(k). Throw every extra cent you can spare into these types of investments.

While we’re being smart about where our money goes, let’s consider family. No matter how successful you are, unless your spouse is equally disciplined and frugal, your efforts to create a financially independent life are going to be for naught.

Adult children need love and advice, not financial support, especially if they’ve shown little to no initiative in life. Supporting unsuccessful children or relatives turns them into financial junkies. You effectively become a drug dealer providing one more hit to an addict. They’ll tell you it’s the last time they’ll ever need help. But the real, fundamental problem is their inability to handle money. You’re doing a great disservice if you give more money to those children who are clearly less productive.

A few more quick tips:

· Take advantage of free events, public and university library systems, free Wi-Fi, and public transportation.
· Go without a car.
· Owning is better than renting. Rent generally is about equal to mortgage payments, but your money is going toward equity you can borrow against or take with you. Real estate is a great financial tool.
· Stay in. Eating out, and going out drinking, dancing, or to the movies adds up fast, and the benefit is fleeting.
· Don’t spend much on gifts. Make or bake gifts as much as possible. Learn to can foods. Consider suggesting a gift-less Christmas this year.

Following any or all of this advice will result in more financial independence, making you happier, more content, and a better sleeper. Good luck!


About Kim Robson

Kim Robson lives and works with her husband in the Cuyamaca Mountains an hour east of San Diego. She enjoys reading, writing, hiking, cooking, and animals. She has written a blog since 2006 at kimkiminy.wordpress.com. Her interests include the environment, dark skies, astronomy and physics, geology and rock collecting, living simply and cleanly, wilderness and wildlife conservation, and eating locally.

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