How to Become Financially Independent
For some being financially independent is having a high income, but high income is not wealth nor is it being financially sound and truly independent. Many people confuse financial myths with actual facts as there are financial advisors that are true experts and give good advice and then there are some who deliver not so good advice. Diego Ruiz Duran believes that some good advice would include helping potential customers and clients know and understand the importance of tax asset placement when selecting investments. This is just one example of the many key insights that can ignite one to be more financially independent. Let’s take a look at some more of the key insights on how to become more financially independent.
First and foremost, one needs to truly understand, as previously mentioned, as it can not be emphasized enough, Income Is Not Wealth. Many people think that having a high paying job is wealth. Of course, with a high paying job, one can obtain a lot of assets; however, only when one spends less than what one earns, can one be on the road to becoming financially independent. It all boils down to spending habits as a profession earning 20 millions a year can end up filing bankruptcy because of what they spend vs a manual labor person being able to retire a million because they spent less than what they earned as the professional spent more than what they earned and ended up bankrupt. By manual laborers spending less than what they earned and saving more, they actually become a millionaire. Saving is very important as Diego Ruiz Duran encourages people to start saving money at a young age to prepare for independence. Whereas, spending is a trap that is easy to fall into if one can not grasp that income and long term wealth are two totally separate things. Income is very important to wealth and becoming financially independent but there are many other components and factors also.
Another key to becoming financially independent is to think long term. Long Term Thinking is a major factor just as income. The income level really does not matter as one can accumulate wealth and achieve financial independence at any level of income. Just as spending vs saving, one should consider long term thinking when it comes to the goal of coming financially independent. Saving for the long term is utmost as Duran has emphasized to start early. Long term investments should be researched and analyzed to be comparable to the ultimate goal of becoming financially independent.
Although as previously mentioned there are a host of components and factors that are important to becoming financially independent but the last one discussed here is the fact that taxes and time matter. Becoming familiar with tax law in reference to one’s investments is crucial as one can take advantage of tax law to pay less at the right time. Most of the time one will be taxed less upon retirement; thereby, making more sense to have tax deferred accounts and investments may be the thing to do.