Are You Financially Independent?

Many dream of becoming financially independent but it rarely happens overnight.You can increase your chances of breaking the shackles of “working to live” if you implement these five money habits:

1. Establish Savings Goals
Establish an aggressive, enthusiastic and consistent savings regime. 20% or more of gross income saved is not attainable for all. The point is to establish a disciplined savings regime earmarking a significant percentage of your salary.Automate the process using a standing order or giro like other essential contributions that are debited such as rent and utilities, after which whatever is left is yours. The trick – out of sight, out of mind. Retaining three to six months of average monthly expenditure available for emergency expenses ensures greater potential to save further surplus income without interruption due to unforeseen circumstances.Over time, your contributions accumulate. The effect of compounding according to Einstein is “the eighth wonder of the world”.

2. Be Frugal
Spend your money wisely, prioritise your purchases. Becoming a bargain shopper requires patience, self-control and forethought before buying.Weigh the options of your purchase and consider whether you are achieving the best value for money. There are a lot of little things you can do to live a frugal and still rich lifestyle that can ultimately make a big long-term impact on your wealth.If this is a new concept, start slowly, make one small change at a time.Figure out which expenses you can do without and which are essential, work towards eliminating the not so necessary ones.

3. Avoid Lifestyle Creep
Lifestyle creep is raising your standard of living as your income increases. This is one of the biggest pitfalls that keep people from building real wealth. I meet many people here in Singapore that earn significantly more than they ever have but still have nothing left at the end of each month.If you really want to accelerate on the road to financial independence, you should focus on upgrading your savings and investments first before your lifestyle. A dollar invested today is much more powerful than a dollar earned in the future. Automate a significant portion of any pay rise into investments and enjoy a small percentage of your raise to spend.

4. Keep Expenses Low
Wait! Isn’t being frugal and keeping expenses low the same thing? When we think of a frugal person, it’s typically a personality trait or mindset that focuses on prioritising spending. Keeping expenses low is generally about spending less. Keeping your spending under control is obviously going to help you track towards becoming a millionaire. Stay away from debt to finance things you don’t need. If you’re paying off personal loans, credit card debt or hire purchase, don’t add other debt to the equation. Spend within your means.

5. Surround Yourself with the Right People
The people closest to us have the largest influence and impact on the decisions we make in our lives. Surrounding ourselves with people who share the same goals of financial independence has a positive impact on our ability to commit to habits that build wealth.Don’t exclude your spouse. Having articulate and track towards helps to facilitate strong financial habits as a team. Friends who share the common desire to be financially independent, free from the shackles of living month to month are much more likely to have a positive impact on your financial habits.What does your future look like? Are you establishing the right habits to put you on track to financial independence? Now is the best time to start building strong financial habits.

Written by Mark Lee
This article aims to provide information, it does not constitute financial advice, nor should it be relied upon as such. You should speak to a financial advisor regarding your circumstances before making a financial commitment. Global Financial Consultants Pte Ltd is a Licensed Financial Advisor and is regulated by the Monetary Authority of Singapore. MAS License number FA100035-3