What is financial independence?

The concept of Financial Independence sounds really good. Very good. For most, this means being financially independent, that is, having your own income and that it is sufficient so that no one has to support or help you. But in financial jargon is not like that.

We talk about financial independence when the income from our investments allows us to live without having to work. The resources they generate are enough to live without working, and in a comfortable way. That is to be financially independent speaking.

A dream, right? Well, the dream can come true, although it is true that it’s not easy and it doesn’t happen to everyone; upside down. Few people in the world can live on their investments, but that does not make it impossible.

How to be financially independent

To achieve this independence there are several ways. You can win the lottery, you can have the luck of your life and make an operation (or several) that happen to be very successful, or draw up a plan. And since the first two depend on luck, we are going to focus on the third.

And for it you have to forget to achieve it by working, because in this way you continue to invest time in it, which means that you are not independent. Therefore, it is important to follow a series of steps that with patience and perseverance can lead to this.

First it is important to be very meticulous and take into account that this process demands sacrifices. Especially because it is essential cut expenses and invest them. That is, if you reduce expenses and save, you can invest those savings, which will allow you to reach that independence.

The problem is the lack of savings culture that we have, because we are used to spending practically everything we earn. Therefore, to reach independence it is essential to spend just enough to live (cover basic needs in a comfortable way) and invest what is left over.

Another important aspect is that, when we start to see benefits from investments, let’s reinvest them. Yes, the temptation to spend them is strong, but this is a long-distance race and spending short-term independence is not achieved.

The basics

There are also some tips that are basic to achieve this independence and that are easily summarized: diversify investment, inform yourself and do everything with the greatest possible knowledge and patience.

Not putting your eggs in the same basket is the number one rule of any type of investment; relying on a single asset can cause us to lose everythingIt is important to have investments in different sectors.

On the other hand, it is always better have the opinion of an expert (if not) and learn a lot about financial markets and economic news. In the end, it is about our resources so nothing should be left to chance.

And finally, and perhaps the most difficult …have patience. Nobody, or almost nobody, became rich in one day with a hit in the stock market. You have to sow to reap in the long term. If that is clear, achieving financial independence can be achieved.

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