Five Practical Steps to Achieve Financial Independence

Are you looking for ways to achieve financial independence? Then you’ve come to the right place. Let’s take a look to see what are five practical steps to achieve the financial independence you so desire!

Let me start by saying. Some of these may seem so simple you are thinking, why didn’t I start sooner? While others may have you scratching your head on where to start or what to do. Let me share five steps down below and help you build generational wealth and feel free.

5 Steps to Financial Gain

1. Set Clear Financial Goals

How can you reach a goal if you haven’t thought of one in the first place? Seems simple enough, right? But the first thing you must do is determine how much you ACTUALLY need for living expenses.

One actionable tip that you can take from this is to calculate what we call the “FI” number. That is the amount of expenses you’ll need annually to live on comfortably. Typically this is 25 times your annual expenses. If you want an easy way to calculate that number and something that goes into more detail, you can check out this blog here.

Once you have figured out that number, you can get started with step 2.

2. Create a Budget – and STICK to it

How will you know what your expenses are without doing a budget? How will you determine how big the gap is between income in expenses so you can save? Where will you know to cut back or where you can add more?

That’s right – a budget, everyone’s favorite! There are a variety of ways to do a budget. Two of the best that I have used personally are:

Detailed Budgeting: You can write down every single piece of income and every debit going out. This will be more time consuming but may help you find where you are truly spending. Once laid out you can then take this and note next to each if it was something that was necessary or unnecessary (you could go without).
Zero-Based Budgeting: A zero based budget means that EVERY dollar is working for you. Typically in this budget you will give each and every dollar a job. Start with your expenses, from there split the rest out into each category you intend to spending, including your savings. Give each dollar a job. If you have less move things around, if you have more, which bucket will it go in?
- Want to know more about zero based budgets – check out this article here.
Reverse Budget: This budget is the “pay yourself first” budget. The idea behind this is you are focusing on your saving goal by paying yourself first, your expenses, and then the left over is fun money. This is a great way to start to automate where your money is going. By paying yourself first, if you are aiming to retire early, this will help you achieve this goal.

Personally I use a something that is similar to the zero-based budget. If at the end of the month I am positive I will add to savings, if I am behind, I look and adjust for the next month. You can easily use excel or Google sheets to set up formulas and set yourself up for success.

Other Budgeting Tools:

Phone Apps: such as Mint, YNAB (You Need a Budget)
Spreadsheets – manual or pre-written
Notebook
Financial Institutions – many now offer various forms of budgeting to help you stay on track
Financial Planner (similar to ones here).

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3. Increase Your Savings Rate

To achieve this goal in a quicker time frame, you will need to look at increasing your savings rate. The initial goal is to save around 20%. If you are aiming for true FIRE, you would be looking to save closer to 50%, which can be a big change for some.

Some items that you can take action on to help you increase:

Cut Unnecessary Expenses: I’m not saying cut out that morning cup of coffee that you love and makes you happy. I’m talking about cutting out things like subscriptions you no longer use, lunch that leaves you dissatisfied or in the bathroom anyways, etc…
- A big change here could be something such as moving to a lower cost of living if that is an option for you and your family.
Raise/Promotion: In this scenario you receive a raise or portion in the form of a percent, take that amount and put it directly towards that savings goal. If you are already living within your means, you won’t miss the extra money and it will start working for you.
401(k) or Company Match: Make sure when saving and investing, if your company offers a match, get to that match. That match is FREE money and can go towards that 20% savings goal.

4. Invest Wisely

I’d like to note, this is NOT investing advice, simply direction.

Saving is only one part of the equation for financial well-being. The other half is investing. For many – myself included the world of investing can be big and scary. However – with the right tools we can work to make it easy for you.

One resource I’d consider reading is the book The Little Book of Commonsense Investing by John C. Bogle.

Investing can be risky depending on the steps you take. Always remember to consult a financial planner or advisor if you have specific financial questions.

Increase Your Income

Simple – Yet so difficult. The easiest way to achieve quicker financial success would be to increase your income, while keeping your expenses in check.

This is the part where we talk about lifestyle creep. It happens to us all. Essentially as your income increases, so does your lifestyle and what used to be $2,000 in expenses might now be closer to $4,000. So why does this happen? As most would speculate this is likely caused by keeping up with the Jones’s. In this case as you continue to increase your income, keep your expenses in check by checking back in with your budget regularly.

Another option would be a second job or side hustle. I know, I’m a parent in can be difficult to find time to work not only one job but TWO!? But it can be possible depending on how you go about it. Here are some examples to steer you in the right direction:

Work from home jobs – look online for things such as Fiverr, at home assistants, or customer service type jobs that you can do after your 9-5.
Selling on Etsy – do you have something cool or homemade that you like to work on? Sell it on Etsy! This can be a bit of a process to set up, but if you have an item that is in need, you could make a nice chunk of extra side hustle money.
Delivery services – things such as Instacart, Doordash, UberEats, etc…
- Note to this, some areas can be oversaturated so it’s more difficult to remain consistent. Another thing to consider is wear and tear on your vehicle along with gas.
Serving/Bartending – While this can be a bit more stressful, it’s a good way to make some extra money, especially on the weekends. For example – this is what I do with a location I have been working at for 20 years. I still work twice a month, it’s fun and a great way to make a little extra cash!

What are other ways you have achieved or are making progress towards your goals? Feel free to send a contact as well with questions or topic ideas!