When will you celebrate your financial independence ?

While you’re going to celebrate Independence Day, take some time to nail down the day you want to become financially independent.

What exactly is financial independence or, as some call it, financial freedom? That depends on your own definition. When you’re financially independent, you work because you want to, not because you have to.

Wikipedia says Financial independence is a term generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities.^[1] For financially independent people, their assets generate income that is greater than their expenses.

Declaring your Financial Independence Day is a better idea than trying to come up with “the number” you need to retire, especially if you’re in your 50s or 60s and don’t have much time to pump up your savings.

6 Ideas to your Financial Independence.

1. Assess your situation in life. The conventional path to achieving financial independence is a lifetime of sound money-management decisions. A young adult who sticks to a proven wealth-building plan can reasonably expect to reach the goal by retirement age. Create a road map for your goal.

2. Pay off your debts in full. Whether it’s high interest consumer debt or a rock bottom rate loan, many of us are carrying a debt burden of some kind.  Clear your debt that’s really the foundation.

3. Create multiple sources of income for retirement. Never forget about your primary career.  Even if you only want to achieve financial independence in order to make a quick exit from the working world, you’ll get their faster if you can grow your career, and turn the increased earnings into passive income streams.

The passive income stream can include interest and dividends from your investment portfolio; rental property; royalty; freelance or consulting work; an annuity; and perhaps a guaranteed pension. These passive incomes can play a key role in helping you reach your goal.

4. Develop “guerrilla frugality” habits.  Each time you get a raise or a promotion, try to resist the urge to increase your spending to match your increased income.  Of course, you should probably increase your spending some, especially if you’re just starting out in your career.  But try to increase your savings more than your spending.

Keeping expenses low while working full time will make it easy to live that way in retirement and reduce the amount of savings you’ll need for a comfortable retirement. “If you spend like a millionaire, you’ll end up a pauper,” Spend like a pauper and you have a shot of becoming a millionaire.

5. Save 20% of your gross income. The key to achieving financial independence is to save and invest money regularly. Saving 20% can be tough for many people, but not for others. If you can’t save 20%, try for 15 or 10%. Practice discipline in all money matters.

6. Invest in diversified assets. That means selecting, different assets like real estate, equity, debt – and holding onto them. Review their performance twice a year, then re-balance your portfolio if the markets shift and you discover you have a higher percentage in one of these asset classes than you want.

I encourage you to take the time to consider what your path to your Financial Independence Day might look like. Because the sooner you start, the better your chances are of reaching that goal, and the longer you'll be able to enjoy the fruits of your effort and sacrifice. Making the right financial decisions today makes a world of difference in your golden years.

Wish you a very Happy Independence Day!!!