Reaching financial independence is a goal many Americans strive to achieve these days. Financial independence takes the right amount of planning and only occurs when your investments begin to start paying more than your expenses. At first glance, a plan for financial independence may sound too good to be true, but with the knowledge, responsible spending and short span of time, financial independence is easily within the grasp of Americans. There is a variety of perks associated with financial independence and is easily achieved with cutting costs as well as earning more. You don’t necessarily have to be at retirement age to achieve financial independence, and some Americans have even managed to reach their goals earlier than they would have otherwise expected.
The 4% Rule
There is no secret shortcut way of going about achieving financial independence, rather the correct way to go about achieving this goal is to know specific tactics. One strategy is called the 4% rule and works well if you are prepared to make certain sacrifices. The 4% rule otherwise known as the “safe withdraw rate,” involves retraining yourself from withdrawing from yearly savings depending on how much you make each year.
The first step of the process requires you to determine your yearly expenses. Once you discover a figure, multiply the sum by 25. The sum is how much money you must save yearly.
Consider Multiple Strategies
Other strategies involve saving around 50% of your total income toward your goals. Keep in mind that this and other various saving strategies are available to fit your lifestyle. To determine what strategy is the right one for you consider what is important to you. Would you rather retire early or retire later and have more income coming your way? In short, there is no wrong answer. Making a decision comes down to what factors are important to you and what kind of lifestyle do you want to live.
LeanFire & FatFire
LeanFire and FatFire are a popular pair of strategies many individuals use depending on how much money you are aiming to spend throughout the year. FatFire is a strategy accustomed to those who are looking to spend more and have a higher standard of living, while LeanFire has a lower spending rate, but works significantly faster. Which plan suits your needs better? The choice ultimately depends on your yearly income and what you are willing to sacrifice to meet your goals on time.
Earn More, Save More
Cutting costs and earning more is a great way to retire quickly. Although a side hustle may require more sacrifice now, it can pay off a great deal in the future immediately. If you’re passionate about a subject, it may be worth researching ways on how it can net you income. The key is to be conscious of your spending habits. Not every plan requires an insane amount of dedication to help you save mercifully.