All along this mission we have been talking about financial independence and I’ve identified and described steps that will help you to get closer to your financial independence. But what exactly is Financial Independence to you? It is important to have a goal and to know what you are working towards to in order to once actually achieve that goal. Now that we are nearing the last part of our 100 steps and now that you know a lot more about finance and money management, you’ll want to dedicate some time to determine your long-term goal so you can kick things into next gear and align your mission with your ultimate financial goal.
Four goals of financial independence
Below are four common goals that people have for their financial independence. They are presented in a logical progression to go through and whereas getting to stage 1 should be easy if you follow this mission plan and even getting beyond that first step into the 2nd step might not be too difficult if you keep up well with the plan, getting into that 3rd stage depends completely on whether you push yourself beyond your current beliefs, habits and limitations and of course whether you ultimately really want to get there. Remember also that whilst the last stage of financial freedom might seem almost unattainable for most of us, it is not completely impossible. People like you and me have done it before and will do it again. But hey I admit that requires some SERIOUS hard work and dedication.
Let’s discuss the four common financial independence goals you might identify with and see which one corresponds most closely to your financial goal at the moment.
Have some extra money
If this is your goal, financial independence to you means having some extra money that you can spend on your hobbies, your family, a vacation or to give to others in need. By being financially organized and aware of what is happening with your money, you hope to close leaks, use opportunities to reduce expenses and look for ways for some more money to come in. It gives you an extra financial breathing space, takes away worries and maybe allows you to spend more on fun or to build a more secure financial future.
Reduce work hours
You want to work less to spend more time on other things in life: this could be time spent with others such as your family and friends, following a dream or passion project such as doing volunteer work once a week, writing a book or working on a new income stream. Financial independence to you means that you have enough money coming in to reduce your work hours in your current job to be able to focus on something else. You might even be looking to be so financially secure to be able to quit your current job and work full-time on your own business or project.
You are looking to stop working altogether and spend your time pursuing “the good things in life”. You don’t want to need a job in order to have money come in, but instead rely on savings or money coming in from other sources that you don’t need to trade time for money. Your goal is to live off the dividends, interest, capital gains, rent or royalties that your investments generate. Many people might have this as a goal, although funnily enough, many who take early retirement also still have a bit of a hustle on the side, be that their own company, working freelance or as a consultant or by keeping up a small blog that still generates some extra money. If the idea of early retirement scares you because you think you’d get bored out of your mind, know that you can always decide to formally retire whilst still doing what you love now and again.
Financial freedom is a stage where you can live out the dreams that you have that are far beyond your current lifestyle. It means you can do whatever you want to do, money is no concern to you. You’d have no problem buying another car, and an extra one for your mum, buying a second house in the Caribbean and buying everybody in the family the latest of the latest gadget. Or take it the other way and give away substantial parts to charity or set up your own charity. Despite what we commonly see on TV, there are many of the rich and famous who don’t lash out, people who have made millions or billions who are big philanthropists, giving their money away to support good causes.
Of course the above are just 4 common goals that people have, there are many in-between stages and mixes of goals. You need to find out which one is your goal. Maybe you love your current job or working in general as it gives you a sense of purpose and a structure in your life and maybe you have no desire to reduce your work hours or to retire early. Maybe you need the security of a set monthly income or maybe you don’t want to set up your own company. Maybe all you need right now is some extra money left over at the end of each month to do something fun with your family, support your parents or to invite your friends for a meal out. Or are you looking to pursue more income in order to give more back to the world?
Step 78 – Set your Financial Independence Goals – in detail:
- Pull out your good old notebook again or digital notepad that has by now seen a lot of your musings, numbers and calculations.
- Brainstorm why you embarked on this mission. Start writing what comes in your mind, be that words, sentences or your life story. It doesn’t matter the format, just get on paper why you started doing these 100 steps.
- Identify if and how your goals might have changed since you started this mission. Maybe you were only hoping to get a grip on your finances but have since become to realize that you want to quit your job and set up your own company? Or that you want to pay off all your debt, including your mortgage, in the next 4 years.
- Identify the role of your job in your life at the moment and in your goals: do you want to get a promotion, move to another company, get a new job, work less, work more, set up your own company, stop working all together?
- If you are looking to reduce your work hours or quit working all together, what would you spend your time on? Your family? A hobby? Your own company? Travels? Voluntary work?
- If you had to identify your financial future in the next 5, 10 and 20 years, what would it look like? What would you have, do, possess, give back to the world?
Whatever it is that most resonates with you, determine your goal so you have a clear end point in mind. Keep that goal with you and remember to work towards it every single day.
Read more about my 100 steps mission to financial independence or simply decide to take control today and join us on our step-by-step quest on how to make your finances work for you, starting with step 1.