How does financial independence work?

We say that financial independence is when a person reaches the stage where he can survive for some time without the need to work. A tempting idea, isn’t it? However, you must be wondering how this works.

After all, is it possible to maintain the standard of living without having to work? The answer is yes. Financial independence is achieved when your money works for itself, that is, when it brings you a return.

For that to happen, you need to save. If you are thinking about being financially independent, you will need to create the habit of setting aside part of your salary. But that’s just one of the things to do.

Just saving will not bring you income. It is true that it will offer a good financial reserve, but it will not be possible to live forever with the saved resources. Therefore, it is important to look for profitable and reliable investments to make your money work while you rest.

Benefits of financial independence

With the panorama presented so far, you must have already realized the possible benefits of declaring your financial independence. Apart from the most obvious and well-known, many others can be mentioned that are also quite attractive.

Obviously, the most interesting benefit is peace of mind regarding the financial issue, which is reflected in other aspects of life. After all, when there is no concern about paying off debts, everything is lighter. But that’s just one of the benefits, get to know the others:

Early retirement

This is the benefit that most seek when it comes to financial independence, as most of us are not in a position to become independent right away. But it is totally viable if you plan to make this possible in the medium or long term.

There are a series of changes being implemented regarding retirement in pak, but one thing is certain: under normal conditions, you will not retire before old age through Social Security. However, that doesn’t mean you want (or can) actively work until that time.

By achieving financial independence, if you wish, you can end your work activities earlier. All this without the need to meet the age or contribution requirements of Social Security, as you will live on your own income.

Furthermore, when the time comes when you are considered eligible to retire by the INSS, you will be able to do so without objection. In this way, obtaining both the income from investments made over time, and the values ​​​​of your retirement.

Safe retirement

Another advantage in achieving financial independence is security at the time of retirement. Contrary to popular belief, retiring alone does not represent any type of financial security, and data even demonstrates the opposite of this.

The big problem is that, with advancing age, these individuals become less and less attractive to employers. When they are no longer able to return to the job market, they need to seek help from their family members.

It should also not be overlooked that with advancing age, new costs arise, in addition to the already essential ones. Medical and pharmacological expenses tend to increase. This can make keeping accounts complicated, even if you receive the INSS 2021 ceiling: R$6,433.57.

Furthermore, even if the individual has not been able to invest and save enough to cover all of their basic expenses, there are still advantages. You can retire through Social Security and use the income as a supplement to your monthly income.

Therefore, financial independence is essential to ensure the individual’s autonomy even with advancing age. Since he manages to receive enough amounts to support himself, he will not be exposed to income insecurity.

Economic autonomy

So far, we’ve only talked about retirement-related benefits, but there are others that can be felt in the shorter term. Economic autonomy is the first benefit to be felt by those who are saving and developing their investment portfolio.

Even if you haven’t reached the level of financial independence for the rest of your life, knowing that you can live a year, or even more, without having to work is a very refreshing feeling.

Since your income is not fully tied to your job, you may feel free to quit a job you don’t enjoy. If you are a freelancer, liberal professional or self-employed, you can allow yourself to reduce the number of days or hours you work.

So you don’t have to work to survive. In this way, work can be rediscovered no longer as a necessity or a sacrifice, but as a source of pleasure or just a way to keep active. After all, even if you love your job, you’ve definitely thought about taking a break.

Furthermore, if you only want to live off the income, that option also exists. Therefore, there is greater freedom in your way of living. After all, you are not tied to a job or other paid form of work.

realization of dreams

It is true that you can continue in your work, even after the long-awaited financial independence or when your income is still insufficient to cover your entire cost of living. But that doesn’t detract from the advantages of being independent.

Financial independence gives you the means and conditions to make your dreams come true. Your salary alone may not be enough to fund your family’s dream Caribbean vacation. However, your earnings can be used for this. Following this example, you could continue at your job and pay off your essential needs with your salary. The income from the investments could be saved over a period of time to make the dream come true.

Thus, you would not need to deprive yourself financially for this. After all, your cost of living would already be covered by your salary. You just directed the extra income towards the trip. In addition to the dream vacation, this situation can occur when buying a new car, a property or another asset.

Personal growth

This is a very interesting benefit that almost always goes unnoticed. After all, he is not directly connected to money. Throughout the process, you will achieve great growth as a person.

Think that, in order to achieve your financial independence, you will need to develop skills such as patience, balance, moderation, discipline, among other things. Therefore, it is a gain as important as earning money.

Moreover, these skills were not restricted only to the financial area. They are useful in various activities of our life. So, by developing them, you end up becoming a better professional, student or person.

But isn’t that a millionaire thing?

You must surely be wondering this now. It is true that many millionaires do have the much-desired financial independence and no longer need to work. However, they are not the only ones who can conquer it.

Those who believe in this type of statement are mistaken. Having financial independence is not necessarily linked to becoming a millionaire or having lots of money. By the way, this is the time to demystify some things.

Living costs play a big role in how much you pay.

The first point to raise is that your financial independence depends on your cost of living and only on that. Get out of your mind a universal figure that represents your autonomy with regard to finances, because it does not exist.

Do you see how your financial freedom will depend on your lifestyle and the way you want to live? Thus, it is not necessary to save exorbitant amounts. Your focus should be on getting enough money for you to survive well. Disconnect the idea of ​​autonomy from ostentation.

It should be noted, however, that every time you want to increase the amount necessary for your monthly survival, you increase the figure of financial freedom. Thus, representing a need for greater effort in building savings and your investment portfolio.

You don’t have to live a life of deprivation

This is a very widespread myth. To achieve your financial independence, it is necessary to have control of savings and the ability to save money. However, this does not mean living a life of deprivation or becoming stingy.

Despite this, the idea that saving and investing requires deprivation is still strong. It is true that it will be necessary to give up certain superfluous expenses, but that does not mean that you cannot enjoy life while you are making your future reservation.

One tip is to choose a fixed percentage to put into your investment account on a monthly basis, on a constant basis. This slice of salary should not undermine their living conditions, it should be somewhere between 10% and 30%. The most important thing is that it be directed with discipline, not every other month.

Organization and financial planning

It can be said that the organization is the key to the success of all areas of our life, in the financial matter it would not be different. Those who wish to achieve economic autonomy will have to learn to use planning in their lives.

Achieving financial independence is a medium to long-term goal. Until you get there, it will be necessary to comply with and execute several processes, which without strategic planning runs the risk of generating frustration. Therefore, organization and finance must be terms that always go together.

Financial planning consists of using actions that help us project a future situation and create, based on forecasts, strategies to achieve our goals and fulfill our commitments.

In this sense, the organization emerges as an ally in the proper execution of these strategies. For example, organize the monthly budget, through cuts in expenses or habits that cause your income to be compromised.