Becoming wealthy is a goal that many individuals strive for but unfortunately may never reach. We live in a society that encourages poor spending habits making it difficult to build wealth and save money.
If you want to become independently wealthy, you’ll need to disciplined, motivated, and have the knowledge to understand wealth building.
In this post, we’ll explore what it means to be independently wealthy, the steps you can take to become independently wealthy, reasons to strive to be independently wealthy, and more. Let’s get started.
What Does it Mean to Be Independently Wealthy?
Being independently wealthy means that you have enough income where you don’t have to rely on others for financial support to pay your bills and live life.
Because the definition is somewhat ambiguous – it can mean different things to different people.
For some, being independently wealthy might mean having enough money to live on their own, pay their bills, and live a lifestyle they enjoy.
For others, being independently wealthy could mean having a certain dollar amount of money. This could be $1 million, $2 million, or whatever you think it means to be wealthy.
To become independently wealthy, you’ll need to find ways to grow your net worth without income from employment.
As you’ll learn building independent wealth is not always easy and will take some time.
How to Become Independently Wealthy
When it comes to your finances, there’s more than one right answer. Below, I’ll explore several ways to become independently wealthy.
Grow Your Income to Become Independently Wealthy
One of the easiest and fastest ways to become independently wealthy is by growing your income. This can be done through various methods. Perhaps you start a side hustle, ask for a raise at your job, or switch careers to make more money.
One key piece of building wealth and increasing your net worth is growing your income.
If you’re looking for additional income to better your financial situation consider starting one of these side hustles:
- Driving for food delivery apps like Doordash
- Make money building websites
- Flip furniture
- Drive for ride hailing services
If you’re looking for an alternative way to increase your annual income – finding a new job is one of the easiest ways. By finding a job at a new company, it’s possible to score a 20% pay raise for equivalent work.
Making more money might seem impossible to many, but with the right plan and resources – everyone can start growing their income and net worth on their journey to become independent wealthy.
Increase Income with Bank Accounts
One of the easiest ways to make more money without any work is by opening an interest-paying checking account like SoFi. This account pays you interest every month which is a great option for those living paycheck to paycheck. It’ll help you generate compound interest after a few months.
Another option is to open a high-yield savings account. Similar to an interest-paying checking account, these accounts will help you to make more money every month to pay for living expenses, make credit card payments, or saving long term.
Save More Than You Spend
To become independently wealthy, you’ll need to manage your money correctly. This means savings more money than you spend each month.
Mastering personal finance can be difficult but getting started is the first step.
For most individuals and families, this starts with establishing a budget. For your budget, you should write down all of your monthly expenses and monthly income. Subtract your expenses from your income. If you are left with a positive number, your finances are in a good place. If you are left with a negative number, you’re going to need to trim some of your expenses or increase your income to get on track.
It’s a good idea to look back through your finances over the previous few months to better understand where you spend your money. You can use this information to find areas that you can trim. For example, if you find that you tend to spend money at restaurants or eating out, you can aim to cook more at home to cut back and spend less.
Saving money will require discipline. Here are a few ideas of simple ways you can save money each month:
- Cut your cable bill
- Limit streaming services
- Eliminate the unused gym membership
- Make frequent trips to the grocery to avoid eating out
Your living expenses are often some of the most expensive items in your budget each month. Items like your mortgage, rent, or groceries likely compose the majority of your monthly expenses. To reduce these, you can consider relocating to an area with a lower cost of living or downsize your current home. Other living expenses like your utility or internet bill might not fluctuate every month but try to lower these costs as much as you can.
If you want to be independently wealthy, you need to save money. By living frugally and spending less than you make you can better your financial situation in no time.
Invest Wisely to Become Independently Wealthy
Investing is essential on your journey to financial independence and becoming independently wealthy. By investing in the right assets, you can grow your net worth and reach financial freedom quicker.
So how can you invest your money?
There are thousands of potential investments you can make to build wealth long-term. Some of the most common include investing in the stock market, real estate, and other small businesses.
There is no one right answer when it comes to investing your money. While I prefer investing in index funds, mutual funds, and other easy methods, investing in real estate through a rental property is on my list for the future. The rental income you can make from your property is a great example of a passive stream of income that you make without having to work.
It’s vital to invest your money in some fashion if you want to be independently wealthy.
When it comes to investing, you want to take calculated risks that offer strong returns with lower risk. The cash flow you receive from your investments can compound exponentially, making building wealth easier over time. While there’s no right or wrong answer on what to invest in – getting started is the first step.
Investing in Retirement Accounts to Grow Wealth
When you work towards being independently wealthy investing money into retirement accounts is certainly a critical piece. Not only do these accounts have superb tax advantages, they can generate enough passive income to live off of throughout your retirement depending on how much money you need.
Investing in index funds or mutual funds is a common tactic for retirement accounts because they are so diversified and great for building wealth long term.
Invest in Real Estate
Investing in real estate can be a superb method to grow your net worth and make a lot of money.
Did you know that owning a home is one way to invest? That’s right, because your home will likely appreciate in value, it can be considered an investment.
For others, purchasing a property to make rental income every month might be their strategy long term. This can be an excellent way to better your financial situation.
Become an Entrepreneur
Starting a business can be a great way to become independently wealthy because of the tremendous income potential.
You might think you need the next big idea to be a business owners but that’s simply not the case. Anyone can start and grow a successful business with enough dedication. You’ll need to have enough money to start the business and having support from others can be essential.
Depending on your financial goals, starting a business can be one of the most effective ways to reach them. For some people, becoming financially independent means not having to work for someone else, and that’s exactly what becoming an entrepreneur will help you accomplish.
The amount of money you can make being a business owner is expansive long term. Some entrepreneurs can make hundreds of thousands of dollars in their first year of business while others report losing money. If you want your business to make money and maintain profitability, you’ll need to focus on growing your revenues and keeping your annual expenses inline with your needs.
My favorite types of businesses to start to become financially independent are service businesses. These businesses often have low startup costs and can have large cash flows.
Check Out These Similar Posts👉 How to Start a Mobile Car Detilaing Business
👉 How to Start a Pressure Washing Business
👉 How to Start a Lawn Care Business
👉 How to Open a Laundromat Business
👉 How to Start a Business as a Teen
👉 How to Start a Storage Unit Rental Business
Avoid Lifestyle Creep
Lifestyle creep can stifle any progress on your journey to become independently wealthy.
Lifestyle creep is the behavior of spending more money as your income increases. For example, if you land a new job or receive a promotion at work and then proceed to purchase a larger home or new car, you might be a victim of lifestyle creep.
Lifestyle creep can have profound negative affects on your journey to financial freedom. Instead of spending your newly found money, investing it and growing passive income streams can help to grow your net worth and become wealthy.
Build Passive Income Streams
Passive income is one of the best ways to build wealth and grow your net worth long term.
Building passive income can be done through a variety of methods. Some people might choose to invest in real estate or stocks, while others might consider investing in digital assets like a blog or website to build enough passive income to achieve financial independence.
When building a passive income stream, you’ll either need a significant cash savings or time. For example, if you want to make enough passive income to pay your mortgage each month, this might take a significant income to invest in dividend stocks to receive enough money.
Other examples – like starting a blog – will require very little capital to get started but instead will require a large investment of your time. Because a blog can take years to start making a significant income, you’ll need to dedicate the time to grow it.
It’s also possible to purchase passive income streams. For example, just as you can purchase dividend stocks that pay you dividends regularly, you can also purchase websites that make money each month. These assets can be expensive, but are a great way to grow your net worth.
Some common examples of passive income include:
- Writing a book
- Starting a blog
- Selling stock photos
- Investing in dividend stocks
- Opening an interest-paying checking account
Grow Your Knowledge
Growing your knowledge is a great way to increase your income to become financially independent. While growing your knowledge alone won’t make you rich – applying your knowledge can (and likely will).
Growing your knowledge can involve many things such as learning a new skill, sharpening your existing skills, or cultivating relationships.
When you’re trying to become financially independent investing in yourself and your knowledge is critical to avoid financial support from others.
Debt can crush any financial goals you have. On your journey to independent wealth, you’ll need to strategize a way to reduce debt and avoid interest payments.
To pay off debt, I recommend starting with the debt with the largest interest rate. For most, this will be credit card debt or a personal loan. These debts typically have interest rates over 15% – making it almost impossible to get your finances on track. By focusing on these high-interest debts first, you’ll be capable of paying off low-interest debts quicker. This method – know at the avalanche debt payment method – reduces the total amount of money you’ll pay in interest.
Consumer debt has exploded over the past decade – making it difficult to reach financial independence for anyone. Crushing your debt should become a priority for your finances as it can save you thousands per year in interest payments.
Paying off consumer debt is the first step to becoming independently wealthy and not needing financial support from anyone.
Give it Time
Becoming independently wealthy will take some time. Just as you can’t expect to become a millionaire overnight, you can’t expect to become independently wealthy overnight, either.
The amount of time it will take to reach independent wealth will depend on your circumstances. For some, it might take a couple of years, but for others, it could take over a decade to reach. When building your net worth you have to give your investments time to compound.
Because of how long it can take, it’s wise to celebrate any financial “wins” you have along the way. This will help you to stay motivated.
Keep Track of Your Finances
How often do you track your finances? For some, it might be every week, but for others, it could happen every few months. If you’re part of the latter group, it’s a good idea to take note of your finances more often.
Set aside time each week to review your finances and see where your money goes. This will help you to become much more aware of your spending habits and help you to curb any emotional spending.
Tracking your finances is vital when working towards financial independence and growing your net worth.
Know Your Needs
Knowing how much money you need to be independently wealthy is essential to your journey.
For example, if your definition of independent wealth involves not relying on income from employment – you’ll need to know how much money you need to live off of.
If your definition of being financially independent means moving out of your parents home and living on your own, you’ll need to manage your personal finances the right way like spending less than you make and living in a low cost of living area.
Knowing your financial situation and financial goals is critical to wealth building and increasing your net worth.
Try to answer these questions:
- How much money do you need to be wealthy?
- How much money do you need to save to live life on your own terms?
- Do I need millions of dollars to be wealthy?
How to Know if You’re Independently Wealthy?
To find out if you’re independently wealthy, you’ll need to take note of your finances to see where you’re at.
Because being independently wealthy is different for everyone – you could be financially independent without knowing it.
In general, being independently wealthy means that you have enough wealth to not rely on any person or job to pay your expenses each month.
There are a few signs you’re already independently wealthy including having enough money independently to pay for your expenses without having to worry about your next paycheck.
Ultimately, being independently wealthy means you do not need financial support from others.
Related: Types of Income
Reasons to Strive for Independent Wealth
Below are some reasons you should aim to become independently wealthy. If you’re not sure if you need to be independently wealthy – here are a few good reasons to reconsider.
Living life on your own terms is something that almost everyone wants, yet most people will need to wait until retirement to reach. Becoming financially independent will give you more control of your life – which comes with many benefits.
When you become financially independent, you’ll gain more control of your life – and finances. You will no longer rely on a paycheck to keep your bills paid.
By having complete control of your money, you can splurge on things you want to and cut back in areas you may not care about. Reaching financial freedom enables you to have more control of your income and lifestyle.
One of the primary reasons many people aim to be independently wealthy is due to the stress that having a full-time job brings.
By increasing your wealth and making more money, you can eventually quit your job or side hustle and live off of your passive income streams like your investment returns.
Being financially independent doesn’t mean all of your stress will go away, however. In fact, you might find that when on your journey to build independent wealth you might be more stressed than you previously were. If this is the case, try to remember that it is just temporary and when you reach financial freedom it will subside.
Difference Between Financial Independence and Being Independent Wealthy
Financial independence and being independent wealthy are often considered the same, but there are a few differences. While the overall ideology of both are very similar, there are some small differences.
Financial independence is usually tied to retirement. When individuals mention they are financially independent, they typically mention being retired. Being independently wealthy doesn’t necessarily mean that you’re retired.
For example, if you move out of your parents house and pay all of your bills on your own, you might consider yourself independently wealthy because you no longer have to rely on your parents or guardians for money.
Both financial independence and being independently wealthy will require you to save money, invest, and grow your income in order to live life on your own terms.
Final Thoughts on Becoming Independently Wealthy
If you want to be independently wealthy, you’ll need to dedicate the time to craft a plan to grow your wealth and manage your money appropriately. For some people, being financially free and independently wealthy mean different things. Ultimately, in either circumstance – not needed financial support is the goal.
It won’t come overnight, however. If you want to be financially independent, you’ll need to give your money time to grow and compound.
Between investing in the stock market, growing passive income streams, and saving money effectively, you can reach independent wealth.
What are your thoughts in becoming financially independent? Comment below!