Working Toward Financial Freedom and Early Retirement Is Not About Sacrifice
Financial freedom has a price
Many people think that to retire early, you must have received a ton of money, or you must sacrifice a lot in life.
But sacrifice is not a word that I think fits well with my path to financial freedom.
Early retirement doesn’t mean stopping working either.
In the personal finance community, many people teach two methods to accelerate the path to true financial independence: make more money or reduce your expenses.
But neither method is wrong in any way.
When it comes to personal finance, some people take frugality to the extreme.
They may even save on coffee more than most people would ever be happy to do. It really is a skill to some extent.
There are also minimalists who always find a way to get rid of “stuff” they don’t need.
In the case of minimalists, less is more. By eliminating all the unnecessary stuff in their lives, their expenses become so low that they can accumulate more money to generate more assets.
Then there is the other side of this equation, which involves making a lot more money.
However you decide to generate more income or add more assets to your net worth, if you have the courage to maintain the standard of your current lifestyle, you can further increase the amount of money you can invest in your future.
Moreover, combining the two tactics “earning more and saving more” is a more powerful strategy.
Regardless of whether you decide to earn more money or spend less, each strategy puts you one step closer to financial independence.
It’s Not About Making Sacrifices; It’s About Prioritizing
What many people think is that the path to getting to early retirement or financial freedom involves sacrificing something to get there. That is, if few people seem to have the skills to make sacrifices, it must be because they are missing out on the fun stuff, right?
Sacrifices and priorities are two different things, and the way we handle money is the way we prioritize what we consider to be most important in our lives.
Experiences last longer than material possessions and make us happier.
I have that clear. There is nothing material that I can buy that makes me happier and its effect lasts longer in time than experiences.
If you have to spend money, try to spend it on experiences that leave a mark on you and make you grow as a person. A trip, a concert, a show, a leisure activity, a game … The memory of some of these experiences will accompany you throughout your life.
As the old rule of personal finance goes, live below your means, and that’s exactly what we do, but we don’t eliminate the things we love.
The Formula For Financial Freedom Repeated In Every Finance Book
This is a subject I have already covered in another article, you can read it here.
It is easy that you have heard it on more than one occasion: spend less than you earn, invest the difference, and start young. It’s so simple, but 100% effective.
1 — Spend Less Than You Earn
Investing is always sexier than saving, and it’s normal. Saving is something that more or less all of us can do.
However, saving is the foundation on which you will build your financial freedom.
All people who have a lot of financial freedom save a high percentage of their income. Doing this has two specific benefits:
They generate a lot of capital that they can then invest.
Because they need less to live on, they achieve financial independence sooner.
2 — Invest The Difference
Investing is anabolic financial freedom. It is the formula for accelerating the path to financial independence and multiplying your money.
The basic rule simply says that you have to spend less than you earn and invest the difference. From the beginning? When should you start investing? Ideally, as soon as possible,
3 — Start As Soon As Possible
Time is your greatest ally in building your financial freedom. The reason is compound interest, which Albert Einstein described as the greatest force in the universe.
Compound interest is the effect of reinvesting your savings plus profits year after year.
The 4 Steps To Your True Financial Freedom
1 — THINK: change your limiting beliefs, they prevent you from making better decisions.
2 — EARN: learn about various sources of income you can generate.
3 — MANAGE: implement your management system, and plan your money outflows in a structured way and simplify your lifestyle.
4 — INVEST: Learn about investment vehicles with solid returns.
Final Thoughts
Financial freedom is the ability to afford your lifestyle without having to work for the rest of your life, but being financially free or retiring early does not mean stopping working or making sacrifices.
Since we are not taught how to handle money in schools, the result is the tendency to incur debt and spend through consumerism rather than asset generation.
Your financial setup, opinion, and the belief you have about money, and how you behave when you have it in hand is what determines whether you will be financially free or retire early.
Many things depend on your financial setup: your expenses, your goals to achieve, and the debts you generate, for example. If you decide not to save or invest because you earn too little, we are afraid to say that you have a very bad setup.
Becoming financially free is a matter of choice, not sacrifice. Define your financial goals or objectives and set a timeline. Then start working towards it and voila.