Financial independence is hugely important, especially among us women! Women are more likely to be in poverty than men. That’s because we accrue less pension (40% less than men), do live longer. In addition, we still earn less, AND build significantly less wealth. So becoming financially independent is hugely important for a nice life. But what does financial independence mean and do you need professional help to achieve it? Should you invest or should you save? Is it possible to stop working or retire earlier? And when are you financially independent? Becoming financially independent is very personal. In this article, we share our tips: financial independence in 5 steps.
Being financially independent, what does that mean?
What becoming financially independent means is very personal. It may mean something different for you than for a friend or colleague. Bank of America did extensive research to discover what factors determine what makes you feel financially independent. These are the 6 most important aspects of being financially independent according to many women:
- Having no debts
- Be able to pay for unexpected expense easily
- Being able to support yourself without help from family
- Being able to help your family financially
- Being able to pay all living expenses each month with ease
- Being able to support yourself without government help
So for many women, it’s not necessarily about being very rich, but about being able to keep your own pants on and not depend on someone else to live your life. But how do you make sure you become financially independent? At elfin, we know this is an interplay of taking smart actions in multiple areas. Becoming good with money and thus financially independent is about more than saving or investing. The right mindset, a good understanding of your finances and making sure you have sufficient income are just as important.
Financially independent in 5 steps
There are 5 areas where you can learn and optimize to become financially independent. They are:
- Mindset
- Budgeting
- Plans
- Income
- Invest
Mindset
Having a positive mindset and using money wisely are the basics. But also spend your money mindfully. We believe in abundance, so don’t skimp on cups of coffee and stress about tight budgeting. But then when you spend your money, do so consciously, and spend sustainably.
Read here
the tactics we use.
Book tip
: the book Blut by Dorothee Loorbach is the favorite book on money mindset of Elfin’s founder Puck
Exercise
: the mindset exercises you get from us when you create a free profile with Elfin.
Budgeting
“Budgeting is telling your money where to go, instead of wondering where it went.” Creating a budget is smart to control your cash flow. To create a budget, you can start with some simple, useful tricks, such as the 50/30/20 rule.
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Plans
You set a budget, and this helps you from day to day. But you would like to set up your finances so that in 5, 10 or 20 years you will realize your dreams and goals. Consider a sabbatical, a trip around the world or starting your own business. For this, it is enormously important to make a long-term financial plan for yourself. This takes you a step beyond budgeting, but takes into account major expenses, an ultimate savings amount or life events that are coming up.
Tip: Lieke, co-founder of Elfin, has developed a very comprehensive e-course to help you create a multi-year financial plan. Become an Elfin member and take this e-course.
Income
Budgeting and saving can be smart, but there is a max to that. You can’t save any more at some point, because you will always have fixed expenses. Which knob you can turn much harder on is the “more income” knob. You can generate more income in several ways. More salary, for example, if you are salaried. Or how about a side hustle? An extra source of income in addition to your primary income? Read this article on side hustles to get ideas.
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Invest
Investing your money to build wealth. That’s a step you can take if you have your basic finances in order. How about investing in index funds? Or in real estate? The idea of investing is that you funnel your money into a product for future financial gain. Starting to invest can be very exciting. Because how do you actually start without losing money and where do you start? We at elfin can help with that. For example, start by reading this blog:
7 tips for beginning investors.
Tip: sign up for this free email course “discovering investing in 5 steps.
Video: check out this video Elfin’s founder Puck recorded about investing with VanEck’s CEO.
The FIRE movement
So becoming financially independent is very personal. Some people even want to become FIRE: financially independent & retire early. The basis of the movement is to manage your money differently (invest a lot, spend less, bring a bit of minimalism into your life, and build wealth to retire earlier. But as it goes with any movement, many branches often follow, such as FIRO (financially indecent & retire often – or the old-fashioned sabbatical) and HOT (Happy, Opportunity Rich, Time Rich). The common denominator is that people start using money as a means to enjoy to the fullest the thing we never get more of: time.
How do you become financially independent?
How you become financially independent is entirely personal. At elfin, we coach you based on your situation. We help you discover what works for you and what fits your situation. If you need advice, we will connect you with approved financial advisors who can help you further.
Our mindset tip
How can you determine for yourself what makes you happy then, and what your goal (which your finances align with) should be? What helps us is the following:
Sit down, close your eyes, take a few good breaths and ask yourself the question, “what if I wake up tomorrow and my life is perfect, what will my life be like?” Let your heart speak here, and you will have your answer. This dream life, this you can realize if you are financially independent. Join elfin, your personal financial guide!
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