Financial independence is a state where you earn enough from all sorts of investment to cover your basic living expenses. It means that you don’t have to work if you don’t want yet, as you still make enough money to live well.
Planning Your Finances
Knowing how much your monthly expenses are is a good start. Afterwards, start setting aside a portion of your income (between 10% and 30%) and put them in an emergency account. This account should hold three to six months’ worth of expenses. After filling your emergency fund, you can begin filling up an investment fund. Note that whatever you put in that fund should only be for investments and nothing else.
Your Investment Vehicle
There are four types of investments: paper assets, commodities, businesses, and real estate.
Stocks and bonds are paper assets. Investing in the stock market has the advantage of being easy to get into and is easily scalable. You have the choice of investing in only a single share or thousands. Most people make money in stocks by buying low and selling high, or selling high then buying low. You can likewise make money off dividends, but that will require a substantial amount of investment.
Commodities are goods and materials that keep their value like gold and silver. Businesses, on the other hand, can give you the best returns. The caveat is this is the most difficult asset to invest in, taking plenty of time and effort for it to earn well.
In real estate, you are investing in the cash flow in the form of rentals. Make sure the rent on your property exceeds the mortgage and other expenses. It’s always best to work with a local agency, though. Prestige Real Estate International LTD and other real estate agents in Auckland, for example, can give you listings for the best properties to buy and rent or flip.
You don’t have to know everything about each investment to get involved in it. Find experts who can mentor and guide you. This way, you can be better assured that your investment efforts will not go to waste.