5 Things Preventing You From Reaching Financial Independence

If you find it difficult to determine how you can make working optional, of these 5 things could be preventing you from reaching financial independence.

During the first month of the year, most people are busy setting goals and making resolutions. Personal finance is one of the most popular goal categories and it makes sense because money is something you have to manage each day.

For some, the end goal may be financial independence. This
means reaching a point where you no longer need to work to bring in an income
and you can live off your assets.

If you don’t want to work forever and never have the option
to retire, you’re not alone. Many of us want financial independence ultimately
but there are often things holding us back from reaching that point.

If you find it difficult to determine how you can live your dream lifestyle and make working optional, one or more of these 5 things that could be preventing you from reaching financial independence.

1. Behind on Savings

One of the key things you need to become financially independent is enough savings to support your lifestyle. Ideally, you’ll want a healthy emergency fund, plenty of retirement savings, and perhaps other investments and sources of income like real estate or an annuity.

The problem is that most Americans are behind on their
savings and don’t even have enough to cover a $500 emergency. It can be
difficult to think about retirement savings when you’re young, but it’s crucial
that you do.

The earlier you start saving for the future, the more time
you’ll allow compound interest to grow your investments. Get into the habit of
paying yourself first. Start by saving a small percentage of your income that
isn’t intimidating.

No amount is too small, even just 1% of what you bring home.
The idea is to create a healthy savings habit. Over time, you can increase your
savings rate when setting money aside becomes second nature.

Another fun way to start saving is to join a 52-week savings challenge. This is something I’m doing this year and it prompts you to set aside money each week. By the end of the year by week 52, I’ll have a sizeable balance saved.

2. Not Paying Down Consumer Debt

Holding onto consumer debt will slow you down from reaching
any financial goal. However, if you remain in debt, you’ll likely never become
financially independent.

I don’t know anyone who is financial independent and still
have consumer debt. Isn’t that like an oxymoron anyway?

Debt is expensive because you have to pay interest on your
balances. This means, you’ll have less money to save and prepare for financial
independence.

Even minimum payments can push your expenses over the edge.
Start paying off all debt that isn’t a mortgage to free up your budget and
income.

You start with high interest debt like car loans and credit
cards. Then move to low cost interest debt like student loans and medical debt.

I find It’s best to focus on one type of debt at a time. After you knock balances out one by one, you’ll get closer to your goal of becoming financially independent.

3. Constantly Comparing Yourself to Others

Comparison is the thief of joy. It can also steal quite a
bit from your wallet as well. Today’s digital society often takes the phrase
‘keeping up with the Joneses’ to a whole new level.

It’s so easy to get caught up in the comparison game. Social
media alone can be super influential. Maybe you see someone you know go on a
fun vacation or you see that someone else has paid off their debt.

You may start to compare yourself or even adopt some of
their same lifestyle choices but trust me it’s not worth it. Comparing yourself
to other people can distract you from staying the course and working toward
your ultimate goal – financial freedom.

Instead of trying to keep up with other people, get clear on your goals and action plan, take social media detoxes from time to time, and keep telling yourself that everyone’s situation and circumstances are different.

4. Giving In to Lifestyle Inflation

Do you increase your expenses whenever you get a raise?
Inflating your lifestyle every time your income increases will often slow down
your journey to become financially independent.

It’s the same with comparing yourself to other people. It’s
unfortunate, but most people either don’t become financially independent in
their lifetime or it takes them an extremely long time to get there.

Knowing this, why would you try to live like other people
and inflate your lifestyle? Find ways to lower your expenses and reign in your
budget until you get comfortable.

Then every time your income increases, just keep maintaining your current lifestyle and put the money to work by investing it in your goal of financial independence.

5. Lack of Clarity

Have no clarity on your goals or plan to become financially
independent can lead to major setbacks. It’s important to be honest with
yourself about what you truly want.

What does financial freedom mean to you? When do you want to
achieve it? What will your life look like at that time? How much money will you
need? How will you come up with that money?

Carefully consider your answers to all of these questions
and form a plan so you don’t have to worry about getting off track and having
no clarity.

Remember, financial independence means something different
for everyone. For me, it means vacationing a lot, spending time on more
creative projects, and living off my investments and rental properties. For my
husband’s grandmother, it meant working in the bar she owned until her 90s
simply because she enjoyed it – not because she needed the money.

Gain clarity and write your own story.

For now, financial independence may seem like a distant
dream, but it will become a reality so long as these 5 factors are not holding
you back.

Have you ever thought
about what it would take for you to become financially independent? Are any of
these things holding you back?

If you find it difficult to determine how you can make working optional, of these 5 things could be preventing you from reaching financial independence. #debt #personalfinance #budget

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