Achieving financial independence can be defined as reaching a state of no longer needing to trade your time and energy for money to support your lifestyle. This requires a portfolio to support your ongoing expenses. A quick and easy rule of thumb is to take your annual expenses and multiply them by 25 (this is derived from the “4% rule”). This will give you a number that represents how large a hypothetical portfolio would need to be to support your ongoing expenses.
But aside from finding ways to accumulate money faster, more efficiently, or spend less of it, there are other things you can do to progress towards financial independence. Admittedly, you will never be able to achieve financial independence without implementing some sort of financial plan but that doesn’t mean that everything you can do to reach your financial goals is “financial.”
Here are some examples of nonfinancial steps you can take to reach financial independence:
Work on your mindset
Most of what we do during our lives is done habitually on autopilot or governed by our emotions. There’s nothing wrong with this but it does suggest that we should at least be sure that our habitual autopilot isn’t going to crash us into the ground regularly. Pay attention to your thoughts and feelings. Mentally check-in with yourself throughout the day and ask yourself “what am I feeling right now and why?”. It’s a good habit to get into because you’ll learn a lot about what drives many of your behaviors. And it shouldn’t shock you to learn many of those behaviors impact our finances at the end of the day. For example, many of us like to go buy something when we’re upset or around certain people. Besides the financial implications, you should make it a habit to check in with yourself for its own sake. You’ll be a happier person and in time maybe you’ll be able to navigate life’s chaos just a little bit easier.
Stay in shape, keep healthy
Healthcare is a huge expense. Especially as you get older. The best thing you can do for yourself to limit these expenses is to make a habit of exercising and eating as best as you can. None of us are perfect but the old proverb that an “ounce of prevention is worth a pound of cure” couldn’t be more in regards to your health. You don’t have to become obsessed with staying in shape or eating better, you just have to make consistent marginal improvements over a long period of time to see the benefits. Improvement is a never-ending process.
Learn new things
Learning new things is an important part of keeping your mind sharp and keeping you happy. If you run through the same habits every day forever, you’re going to end up in a rut. Learning something new gets your mind out of mental ruts. It opens the doors to new ways of thinking about and observing the world around you. This in turn staves off boredom, which keeps you happy and interested in your life. We’ve all tried to cure boredom with money and we all know that it doesn’t work. So trying curing bored with a new hobby, book, or some other challenge.
Erik Goodge is the President of uVest Advisory Group. He holds a B.S. in Economics and Cognitive Science from the The University of Evansville. Erik is a Marine Corps veteran of the Afghanistan campaign and Purple Heart recipient. He is from Evansville, Indiana and currently lives in near-by Newburgh with his wife and daughter.