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Are you tired oflivingpaycheck to paycheckor relying on others to live a comfortable lifestyle?
With aplanand determination, you can becomeindependently wealthy and live life on your terms. Mostpeopleaspire to achievefinancial independence, but sometimes it seems more like a dream than a possibility. In reality, the independentlywealthy lifestyleis achievable for teachers just as it is for entrepreneurs.
In this article, you will learn how to handle yourmoneyto create wealth – on your terms.
What Does It Mean To Be Independently Wealthy?
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (1)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2021/02/independent-wealth-meaning-1024x684.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (1)")
Being independently wealthy means you have enough money you never have to work again to pay for your expenses, or need monetary support from others.
Independent wealthis different from financial independence. Financially independent people do not rely on other people to pay theirbills– they have a steadyincome from employment, business, orpassive incomestreams.
When you areindependently wealthy, you not only pay yourbillswithout help, but you also do not need to work to earn anyadditional income.
How muchmoneydo you need to be independently wealthy? This number is different for everyone and is entirely dependent on yourdreamsand aspirations in life. It could mean you havemillions of dollarsearning interest, or a few hundred thousand. It depends on the lifestyle you prefer.
What Do Most People PerceiveIndependent WealthTo Be?
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (2)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2021/02/independently-wealthy-perception-1024x625.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (2)")
Are you independently wealthy because you drive a Ferrari? Most people view independent wealth as unachievable because they havemisconceptionsabout what it is. When you think about someone who has achieved it, do you see someone who:
- Has a few sportscarsin their garage?
- Lives in a high-end neighborhood in amassive house?
- Makes millions of dollars every year from their business?
- Wears high-end fashion clothes?
While somewealthy individualslive in the manners described above, you may be surprised to learn that most independentlywealthy peoplelike to blend in. To achieve a highlevelof wealth, most people avoidlifestyle creepand:
- Live in a nice but not extravagant neighborhood
- Drive an ordinary car
- Dressin an ordinary manner
- Work aregular job– but work harder than everyone else
- Have the moneydisciplineto buildwealth over time
Most independently wealthy people live average lives. They take a vacation once in a while, enjoy a drink at the local tavern, and do everything else most people do (exceptlivingbeyond their means).
Do You Need Millions To Be Independently Wealthy?
The bottom line is you need enough money to be financially free without ever going to work. This doesn’t mean you have to stop going to work, but being financially free gives you this option. The amount you need depends on your preferred lifestyle.
If you have enough money to meet yourexpenseswithout having to work for a monthly income, you may be close. To continue living without relying on having to earn money, you must createpassive income.
For instance, if you make $5,000 every month from your investments (passive income) and your monthlybudgetis $3,500, you have already createdindependent wealth. This means that you can live indefinitely without ever going to work as long as you do not increase your monthly expenditure.
If you spend $3,500 every month, you will need $42,000 every year for your budget. Most financialexpertsagree you need at least 25x your annual expenses to be labeled “independently wealthy” – that is: $42,000 x 25, which is $1.05 million.
You also need to account for twice your discretionaryspending, which might be up to $60,000 every year. This means that you need:
1,050,000 + (60,000 x 25) = $2,550,000
You need to save up to $2.55 million or havepassive incomethat gives up to $102,000 every year. Only then are you considered “independently wealthy.”
How Do You Know You HaveIndependent Wealth?
Building independent wealth requiresdisciplineand diligence. The concept of delayed gratification, where you enjoy less today to enjoy more tomorrow, has to be applied here. When you get there, you will know if:
- You do not have to think of yourfinancial situationbefore making a decision
- You can live below your means and feel content
- You have enough passive income to fund your lifestyle
- You are worth more than 20timesyourannual income
- You can choose not to work and still support your lifestyle
The above are not the onlyindicatorsthat you are independently wealthy. But they will help you realize yourfinancial position.
11 Tips To Become Independently Wealthy
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (3)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/05/top-financial-tips-1024x764.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (3)")
Unless you win the lottery or are given a large inheritance, it takes time to create wealth. If you decide you want to be independently wealthy in the future, it may take you many years to achieve it. However, with discipline, you can do it.
Below are 11 simplewealth-building conceptsto help you get where you want to be.
1. Be Financially Disciplined
Financial discipline helps you takecontrolof themoneyyou earn. If you never control how you spend your money, you will never have enough to be financially free.
Below are a few pointers to develop your financial discipline:
Avoid Spending More Than You Earn
If you spend adollarmore than you earn every month, you will have to survive by managing increasing debt. This also means that you will livepaycheck to paycheck, and you may never make any progress in building wealth. The firstrulein building wealth is tospend less than you earn.
You can do that by creating abudgetevery month.
2. Create A Monthly Budget
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (4)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2021/01/budget-screenshot-1-1024x749.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (4)")
Your finances and future spendingplanwill make moresensewhen you write out a budget every month. Instead of spending money and wondering where it went each month, complete a budget to tell your money where to go.
Abudgetis not atoolforpeoplelivinga frugal lifestyle. Evenmillionaires complete monthly budgets, and it might be one of the principles that drove them to their millionaire status.
For starters, you can downloadmy budgetingworksheets here to start a budget.
3. Have AnEmergency Fund
An emergency fund covers you if your car breaks down, you lose your job, or you have any other financial emergency. Instead of taking a loan to cover the unplanned expense, you will have enoughmoneyin your emergency fund to paycashfor the fix. This way, you will not need to delay your plan by putting moredebton a credit card or taking out an expensive payday loan.
Usingcredit cardsor a loan to pay for emergencies is not always the best idea. You may not have paid the previousdebtin full before the nextemergencyhits. Again, you will have to pay interest andfeesthat dent your wealth.
How do you develop the financialdisciplinetobudgetand spend within your means?
Financialdisciplineis a decision. It takeseffortand will not always be easy, but you will do it if you have the determination. Keep your eyes on the goal, and you will have the motivation to do it.
4. MakeSavingsA Priority
If you paybillsfirst, you will always find it challenging to save. If you save, then proceed to pay bills (pay yourself first), you will have established a saving culture that will help you later in life. You need to have along-term goalfocused on increasing your savings.
Every month, you need to save at least 15percentof your earnings.
When you receive your paycheck, you should automatically save 15percentbeforeplanning out yourmonthly expenses.
Yoursavingsshould go into an account that gives you interest every year. An employer-sponsoredretirementplan is usually your bestoptionbefore a RothIRAor other retirementinvestmentplan. With time, the savings will earn youpassive income, which will contribute to yourindependent wealth.
5. Avoid Debts
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (5)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/02/Depositphotos_2474025_xl-2015-1024x683.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (5)")
While some debts, such as a smallbusinessloan, can help you start a business and build wealth, bad debts will cripple yourdreamsto becomeindependently wealthy.Consumer debts, such ascredit card debt, have high interest and will keep you from growing your wealth.
Credit cards, payday loans, long-term loans, and mortgages all have one thing in common – interest. By the time you repay your loan, you will have paid the lender a lot of your hard-earned money.
Debtcreates dependency.
Debt has a way of creating a snowball that continues to get bigger and bigger. To free yourself from the downward spiral of debt, you need to stop adding to your existing debt.
If you haveconsumer debt, come up with aplanto pay it off fast. If you are currently debt-free, do everything in yourpowerto stay this way.
The easiest way to avoid debts is to live within your means byspendingless than you make each month. For most people, when theirincome increases, they increase their lifestyle and spending, also known aslifestyle creep.
If they are unable to sustain the new lifestyle, they apply for a new loan. However, if you increase your income, the firststepshould be to increasesavingsand investments.
You can have acelebrationor two for your hard work, but don’t reward yourself by increasing your debt.
6. Calculate Your Net Worth
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (6)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2021/01/top-budget-categories-1024x683.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (6)")
Today, your net worth might be a negative number. However, that number should motivate you to grow yourwealth. The misconception with mostpeopleis that calculating net worth is only for rich people.
Calculating your net worth allows you to understand your currentfinancial position. In turn, this helps you to make betterfinancial decisions with a clearpictureof where you are to where you want to go. You will see your wealth grow from a negative number to a higher number as you grow your investments and pay off your debts.
Your net worth might be negative for many years, especially if you have amortgageon your house. However, with hard work and determination, you can move your net worth number higher and faster than you may realize.
Simple Steps To Calculate Your Net Worth
Your net worth is the difference between what you own and what you owe.
Debts fall into categories such as:
- Carloans
- Credit card bills
- Loans from banks, friends, home equity, among others
- Any othermoneyowed to lenders
Subtract all the above debts from yourassets.
Assets fall into categories such as:
- Investments inreal estate, 401k, and IRA, among others
- The value of your vehicles
- Cashin the bank and other accounts
- Jewelryandantiquesyou own
- The value of your home
You can also use online calculators to estimate your net worth. Keep in mind, you do not need a set net worth number to be consideredindependently wealthy. Your net worth is not ameasureof yourindependent wealth.
Net worth alone may show your totalassetsbut doesn’t calculate yourpassive income. You achieveindependent wealthwhen you have enough passive income to support yourlifestyleindefinitely.
7. Invest Your Money
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (7)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2019/06/return-on-investment-finance-investment-fund-time.png "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (7)")
If you earn minimum wage and do not invest, it will take youdecadesto build wealth – if at all. Minimizing your riskwill help you build wealth faster. The risk here doesn’t mean you go for pyramid schemes and avenues that promisemillionsovernight.
If you decide to invest your money, here are a few pointers to get you started:
- Learn as much as you can about theinvestmentyou are about to make. You will know you are good to go if you can explain it to otherpeopleand both of you understand the concept.
- If the investment involves even a slim chance that you might lose all your money, avoid it.
- Avoid putting more than 10percentof yoursavingsin a risky investment avenue.
- Avoidinvestingin trends and fads that may excite you for a while and then burn you. Instead, go for long-term investments such as index funds.
Income from investmentsis one of the best ways tocompoundwealth by using yourmoneyto make more money. This creates acycle of wealththat can build upon itself over and over again.
Where Should You Invest Your Money?
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (8)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/08/ways-I-get-free-stocks-1024x768.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (8)")
Investing is not as exciting or scary as it sounds. If you do it right, investing is a very dull venture until your wealth starts tocompoundat impressive rates. The best way to invest is with a “set it and forget it” long-term investing strategy. This involves investing a little each month in an investment vehicle designed to make you wealthy – over time.
Stocks AndMutual Funds
Investing in stocksand mutual funds is a great way to build your wealth. These two options are simple and relatively less risky. Your401kandIRAwill help you set up an investmentportfoliothat will help you becomeindependently wealthy.
However, even if stocks and mutual funds are a great investment option, you still need to understand how investing works. If you are well-educated, you will minimize yourchancesof losing money, and instead, you will make more in the long run.
If you want to learn to invest in the stock market, what better way than to do it with free money? If you sign up for any of the below apps, they will give you free stocks or cash!
Robinhood
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (9)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/08/robinhood-logo.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (9)"){kind=logo}
Robinhood is an investment platform that will give you free stocks when you sign up.
Click here to sign up for Robinhood.
Stash
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (10)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/08/stashiphone.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (10)")
Stash investing will give you $5 just for signing up. This investment platform invests all your spare change for you by rounding up purchases.
Click here to sign up for stash.
M1 Finance
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (11)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/08/m1-finance-1024x482.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (11)")
If you start an account with M1 Finance with a minimum of $1,000, they will add an extra $30 to your account
. Click here to sign up for M1 Finance.
Webull
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (12)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/08/webull-1024x536.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (12)")
Right now if you sign up for the Webull investment platform, they will add two free stocks to your account!
Click here to sign up for Webull.
Real Estate
Real estate pays when you focus on long-term investments. You can buy property, hold it for a few years, and sell when the value appreciates. This is a slow-paced investment strategy, but it gives you great returns. Again, theincomeis passive if you can findrenters to pay themortgageeach month if it is not your primary residence.
You can choose one of the various methods to invest in real estate but always go with the less risky approach. As you buy and hold to sell later, you can get aninvestment propertywhere you collect rent every month.
Rental propertiescan create an impressivestream of incomethat can compensate for an increasedcost of livingor otherexpensesin your life.Rental income, if high enough, can replace yourcurrent incomewith having to get a side hustle foradditional money.
8. Learn New Skills Or Hone YourCurrent Skills
Investing in yourself is one of the best ways to buildfinancial wealth. Hone yourcareer skillsor invest in learning new skills to stay ahead of the learning curve. You can also learn more about finances and how to manage your money.
With additional knowledge, you will increase your chases forcareeradvancement, which will allow you to invest more as you make more money. You will also have access toopportunitiesthat others do not.
Knowledge helps you create more wealth.
Educational topics to help you build wealth include:
- Investingbasicsand thestock market
- The basics of economies
- Compoundinterest and how it works
- Why you should avoid debts
- Personalfinanceconcepts
- The relation between time and money
- Personal finance concepts such asbudgetingand getting out of debt
- Readingfinancial statements
You can also learn an entirely new skill such as art and crafts, music, photo and video editing, writing, web design, or any other high-incomeskill that can increase your salary.
9. Increase YourCash Flow
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (13)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/03/cash-back.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (13)")
The easiest way to increase your income is to get a side hustle. You can learn a few skills and apply them to a side job. These side gigs will help youraiseextra moneyto add to yoursavingsaccount.
Popular sidehustlesto make more money
Freelancer
Popular freelancing jobs include:
- Ghostwriters
- Data entry
- Transcription
- Web design
- Blogging
- Product marketing
- Any other passion you can monetize
Fiverr is a great website to make money using your talents with digital media.
If you are skilled and land a good client, you could earn enough to sustain your monthly budget. You can then save 100percentof your primary income. There are several ways to attract clients. You can search on onlinejobboards, or you can create ablogfrom where you offer your services.
Consultant
If you are good at what you do, you can have a sidegigas a consultant.Peoplewill come for your advice, and you charge them accordingly.
Besides taking a side gig, you can increase yourincomethrough:
Asking For A Raise
Your currentcareercan help you earn more every year. How would it feel to move from making $70,000 a year to earning $120,000 a year? It would boost your income and yourdreamsof becomingindependently wealthy. However, you have to put in theeffortto show your superiors you bring enough value to your employer to deserve a raise.
Before you ask for more money, you need to ensure you are a top performer.
If you haven’t been on the list of top performers in yourcompany, start working towards it. You can liaise with other top performers or with your supervisor. Your supervisor can help you identify key performance indicators for your position.
If you can achieve at least three trackable indicators within a few months, you can position yourself for a substantial promotion.
Find A New Company To Work For
Not all companies will appreciate your value. Not too long ago, people worked for the same company for more than thirty years with the promise of a pension. However, pensions are almost extinct as the vast majority of companies offer employees a 401k.
If you feel that thecompanyyou work for doesn’t properly compensate you for the work you do, switch companies. When you have options, it is even easier to negotiate for araisein your current company. If another company has an open position, interview and maintain contacts with the humanresourcepersonnel there even if you do not intend to switch companies.
SwitchCareers
If you do not earn what you feel you are worth, a career switch may be the next best option. While change can be scary, often, we will not achieve what we are truly capable of unless we take a few calculated risks. Getting out of our comfort zones and embracing change can pay dividends.
Think about your skills and passions and where you can apply them to get the best returns.
Start ABusiness
A business can supplement your sidegigand your investments. There are so many smallbusinessesyou can start in your local area or online. Start small and grow the business gradually. If you are already in debt, the business can help you pay it off.
No one business fits all areas –checkout whatpeoplein your neighborhood need and supply it to them. The firstruleof business is that it should solve people’s problems. If people in your neighborhood struggle with recycling plastics, you can start a recycling business in that area.
10. Invest In YourFamilyAnd A Home
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (14)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/03/Depositphotos_2599292_xl-2015-1024x680.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (14)")
Would you ratherrentor buy a home? This is adebatethat sparks different views, and there are good cases for both renting or owning a home.
However,homeownershipis one of the most reliable investments you can make. Not only can it help you increase your net worth, but it can also provide financial security and safety for an unstable future economic time. If you are old and unhealthy with no one to takecareof you, you can sell your home and get enoughmoneyto fund anursinghome.
While a homemortgagemay initially push your net to the negative, the long-term advantage of a paid-off home will help you quickly increasewealthbecause a home appreciates. Even if you never sell it, you can leave it to yourchildrenas an inheritance. It can be a great starting point for your children to build their own wealth.
You also need to invest in yourmarriageand yourchildren. For starters, a divorce will set you back many years. Not only that, if you work towards becomingindependently wealthy with your spouse’s cooperation, you will get there faster than on your own. When you invest in your children and their education, they will be given the tools to become financially independent and leave you to work on yourfinancial goals.
11. Set Goals
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (15)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2021/01/primary-goals-1024x1024.png "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (15)")
Becoming independently wealthy requires you to set goals and be consistent. Having a vague idea running in your head will never work. The vision might never materialize if you do not put it down on paper.
Be specific on what you need to achieve and how you want to do it. Set dates and deadlines and then take action. Being committed to the process of building wealth helps you stay ontrackand be consistent.
A specific goal should be like getting out ofdebtin five years by taking a side hustle to increase your monthly debt payments. From there, you can work on thedetailsof the side hustle.
Why Focus On BuildingIndependent Wealth?
Becoming independently wealthy has a host of benefits, including:
Freedomto Focus On Your Passions
Once you have enoughmoneyorpassive incometo live infinitely without the need to go back to work, you will have the time to focus on what makes you happy. You will have the ability to do things you love and not things you have to do.
For instance, you can grow organic vegetables in your kitchen garden for a healthierlifebecause you have the time.
Make LongTermDecisions
Thefreedomthat comes with beingindependently wealthy allows you to makedecisionsthat willbenefityou in the future. You will cease making decisions for immediate survival. This can even help you create more wealth as you will find a way to avoid debt.
Change How you Relate ToMoney
If you have enoughpassive incometo live a goodlife, you will seemoneyonly as atoolto live the life youdesireand to help others. The money will notcontrolyou or define who you are. You may also learn how wasteful it is to worry about impressing others by wearing expensiveitemsor driving expensive vehicles.
Have Peace, BeatStress
If you are debt-free and have enoughpassive income, you will feel more at peace. You will be less stressed by yourfinancial position. When you do owe anyone elsemoney, you cancontrolyour money and fund the passions and charities that you believe in.
You Can Focus On YourHealth
Financial freedomgives you back time. You will have enough time to exercise and makehealthy meals and focus on getting enoughresteach night rather than cutting it short to go to your second job. By focusing on your health andrelationshipswithout thestressof debt, you can focus your time and energy on things that really matter.
True wealthinvolves more thanmoney– it involves a healthy body, mind, and relationships.
Sacrifices To BecomeIndependently Wealthy
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (16)](https://i0.wp.com/arrestyourdebt.com/wp-content/uploads/2020/11/high-six-figures-1024x1024.jpg "11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (16)")
Building wealth is ajourneythat involves sacrifice. Some of the things you may have to give up include:
- Eating out as youplanon saving and paying off debts
- Idle time as you may have to take a side gig
- Luxuries such as newcars
- You may have to give up cable TV
Simply, you will have to cut your monthlyliving expensesand work morehoursto increase your income. You may not enjoy a vacation for a few years, but you will have many more years after that. If you are married, you have to engage yourspousein the journey so the two of you can reach yourgoalsfaster.
It is now up to you!
- Have you set your goals already?
- How many years will it take you to become independently wealthy?
- What will you have to do to get there?
- Do you have asavingsaccount?
- What investments have you made, and which others do you plan to have?
Start today. One foot in front of the other is the firststepto any journey. Even a marathon starts with small steps.
General FAQ
What Does It Mean To Be Independently Wealthy?
Being independently wealthy means you have enough money you never have to work again to pay for your expenses, or need monetary support from others.
Do You Need Millions To Be Independently Wealthy?
Most financialexpertsagree you need at least 25x your annual expenses to be labeled “independently wealthy.”
![11 Easy Tips To Become Independently Wealthy [and What It Means] - Arrest Your Debt (2024)](data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABCAQAAAC1HAwCAAAAC0lEQVR42mP8/h8AAvMB+NzmkbcAAAAASUVORK5CYII=)