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How To Achieve Financial Freedom: 9 Steps Towards Financial Independence

How To Achieve Financial Freedom: 9 Steps Towards Financial Independence

Sheiresa McRae Ngo   Thu, June 27, 2024   Bankrate

If you’re like many people, you dream about reaching a point where you don’t have to worry about money, and you can quit your 9-to-5. According to Bankrate’s recent Financial Success Survey, 41 percent of Americans would consider themselves financially successful when they never worry about their finances.

Most Americans say they wouldn’t feel secure until they’ve made at least $233,000 a year, according to Bankrate’s Financial Freedom Survey. To feel rich and financially free, Americans said they would need to earn an average of $483,000 a year.

Fortunately, it’s possible to achieve financial freedom. With careful planning, disciplined savings and wise investments, you can reach your goal. Here’s how you can become financially independent.

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What is financial freedom?

Financial freedom means different things to different people. Some define it as never having to work again, while others say being financially free means eliminating debt.

Among Bankrate’s Financial Success Survey, 19 percent of Americans say having enough money to quit working represents financial success while 41 percent say living without debt fulfills this goal.

“Financial freedom describes having enough wealth to live without having to work actively for necessities,” says Dennis Shirshikov, head of growth at gosummer.com and finance professor at the City University of New York. “It means having the means to afford the lifestyle you want for yourself and your family.”

“Achieving financial freedom allows you to make decisions that are not solely based on financial constraints,” Shirshikov adds. “For example, you can choose to pursue passions, hobbies or even career changes without worrying about the financial repercussions.”

What is the FIRE movement?

The Financial Independence, Retire Early (FIRE) movement is a lifestyle and financial strategy that aims to achieve financial independence and early retirement. The goal is to save and invest enough money to provide a sustainable income for the rest of one’s life, allowing for retirement at a much earlier age than the traditional retirement age.

FIRE gained attention after the publication of the book Your Money or Your Life by Vicki Robin and Joe Dominguez. The movement emphasizes assessing each purchase by analyzing the working hours needed to make the purchase.

Followers of the FIRE movement typically aim to save 50 percent to 70 percent of their annual income and plan to retire when their savings reaches around 30 times their yearly expenses, or roughly $1 million. Once retired, they make small annual withdrawals (usually around 3 percent to 4 percent) from their savings to cover living expenses.

“One would have to live significantly below their means and be aggressive when it comes to their asset allocations,” says Steven Charlton, certified financial fiduciary and founder of Wisdom Financial. “The FIRE movement can be utilized to find financial freedom by growing assets proportionately in order to be able to live off interest and dividends. This way you won’t have to live off the income when you decide to retire.”

How to create financial freedom

Achieving financial freedom involves careful discipline and planning. The following steps can help you reach this milestone.

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Our writers and editors used an in-house natural language generation platform to assist with portions of this article, allowing them to focus on adding information that is uniquely helpful. The article was reviewed, fact-checked and edited by our editorial staff prior to publication.

https://www.yahoo.com/finance/news/achieve-financial-freedom-9-steps-175605001.html

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