Many people dream of financial independence. But what exactly is financial independence? Can you achieve it? Do you already have it? Do you really want it?
Financial independence means different things to different people. The best way to reach it is to know what it looks like specifically for you. Here are four different styles of financial independence and how to attain them.
1. The Ability to Quit
For some — in particular, younger workers seeking early retirement — financial independence doesn't mean the absence of work but rather that it's a choice. A well-funded portfolio reduces stress and allows you to continue being a productive worker for as long as — or as short as — you want.
This form of financial independence may mean a large nest egg to draw on. But it may also come from a diversified portfolio of income streams.
2. Cocktails on the Beach
The traditional vision of retirement is complete retirement from all income-producing work. This is a retirement spent playing with grandkids, going out with friends, golfing, or drinking cocktails on the beach.
Of course, this type of financial independence costs the most and requires the most planning to achieve. You may need to make sacrifices earlier in life to save aggressively and consistently.
3. Mostly Passive Income
Not everyone wants to just stop working completely. It may also be unrealistic to expect to retire early and live entirely off your savings and investments. In either case, your financial independence may mean building up income streams that are largely — but not entirely — passive.
Many retirees use things like rental units, royalties from artistic works, or investing in small businesses. This is often the most accessible form of financial independence because you will still earn a decent income.
4. Following Your Dream
Once you're free from the need to work 9 to 5 to support yourself or a family, what would you like to be able to pursue instead?
This dream occupation might be writing a novel, inventing something, starting a business, or taking on a low-paid role just because you like it. Therefore, retirement isn't a time of stagnation, and it might even be profitable. But you'll need the freedom to find out if you can make it work.
Where to Start
Which dream of financial independence do you have? How close might you be to achieving it? Find out by meeting with a retirement planning service today. With their expertise and your vision, you'll soon have a solid plan to achieve whatever true financial independence really means to you.