“Why should I strive for financial independence? My life is pretty good as it is,” you may ask yourself.
To me, happiness is one of the greatest things you can strive for in life. Happiness is an indicator for a fulfilled life with lots of love. If you’re happy as it is, I’m happy for you!
However, almost on a daily basis, I meet people who are not very satisfied, let alone happy, with their lives. They are dissatisfied with jobs that play a dominant role in their lives, but have too many large financial commitments to call it quits. They have neither the savings nor the passive income to go jobless for very long.
With passive income, you can get that freedom. Sound personal finances give you the liberty to take the decisions in life that you want to take, rather than the decisions you have to take.
Ask yourself: are you happy in your job, or does it feel like you’re trapped in the rat race? Do you wish you could spend more time with your loved ones? Do you have a strong desire to travel the world and expand your horizons by experiencing different cultures? Or maybe you simply want a little more time to read some books and pursue your hobbies, or just host some fantastic parties for your friends at your primary residential mortgage – but you simply don’t have the energy.
It hurts me to see someone trapped in a life he/she doesn’t enjoy. I want you to be able to have financial independence and the freedom to live the life that makes you, and your loved ones, happy. All it takes is correcting these five mistakes that you might be committing right now:
Mistake #1: Living Beyond Your Means
Most people live beyond their means. Right after graduation, we want to enjoy the sweet life of buying the things that were out of reach during our studies – a car, expensive handbags, and so on – while we still have student loans to pay off. Some years later, when our nesting instinct kicks in, we often buy an apartment that’s ready for family expansion. Might as well, so we don’t have to move in a couple of years, right?
Wrong. We’re getting into a habit of living beyond our means. Soon, this higher standard becomes the norm, and we have difficulties stepping back. And, typically, we stretch ourselves not only with our mortgage or rent but we also do the same with our car, our vacation, our clothing… And we’re chaining ourselves to our desks at the office because our bills are a size larger than what we can afford.
Mistake #2: Putting All Your Eggs in One Basket
Your financial advisor will tell you to diversify. Listen to him. Nobody expected the oil price to fall from a peak of USD145 in 2008 to below USD30 this year. Nobody expected Enron to go belly-up. However, those who had all their eggs in either of these baskets have suffered.
Mistake #3: Considering Bank Accounts the Best Place for Your Money
Human beings are risk averse. We are programmed to maintain the status quo – and losing money is a loss of status quo. Fair enough. I don’t want to lose my money, either. However, too many people react by keeping their money in a ‘safe’ bank account, where they are in fact losing money every day due to inflation. Did you know that if you saved your first pay check in a bank account, it is easily worth much less than half by the time you reach retirement? Ouch.
Mistake #4: Failing to Learn From Successful People
There are plenty of people out there who are doing very well growing their wealth. I don’t know about you, but when I decide I want to take on something new, I look to the people who are already successful at it in order to learn from them. So, in finance, look at what the rich are doing. And their money is multiplying fast.
Mistake #5: Failing to Start Early – or Even Now
There’s always an excuse for not starting your financial freedom journey. The earlier you seriously start building your wealth, the sooner you will have the true freedom that comes with financial independence. Did you know that if you saved one-third of your income at around 6%, you would be able to live off the returns after about 20 years? Don’t you think it’s time to stop making excuses and take action to begin the journey towards financial independence? In the words of Laozi: “If you do not change direction, you’ll end up where you’re heading.”
