How can you declare your financial independence?
Next week, we observe the 4th of July with sparklers, picnics and parades.
And living in a country that offers so much freedom, we have a lot to celebrate. But on a more personal level, you may still be working toward another type of independence – financial independence.
What can you do to speed your progress toward this goal?
Here are some ideas to think about: • Free yourself from excessive fear. As an investor, it’s not hard to find something to fear. Oil prices, interest rates, political squabbles, even natural disasters – at any given time, each of these factors (and many more) might be blamed for volatility in the financial markets.
In response, many people take a “time out” from investing. Don’t let fear hold you back. It takes discipline and some mental toughness to stay invested in all economic environments, but if you’re constantly jumping in and out of the market, you’re almost guaranteed to miss out on the kind of continuity and opportunities you need to move toward your financial freedom.
• Liberate your investments’ growth potential. Many investors avoid investing too aggressively, wishing to lower their risk level. And that’s certainly not a bad idea.
On the other hand, you can easily slip into investing too “safely” by keeping the bulk of your portfolio in investments that protect your principal but offer so little in the way of return that they may not even keep up with inflation. So, try to always maintain a reasonable percentage of growth-oriented vehicles in your portfolio.
The exact amount may depend on your age and tolerance for risk, but at virtually every stage of your life, you need some growth potential.
• Avoid the tyranny of debt. It’s not easy to stay out of debt. But carrying a heavy debt load is truly a burden – you’re not only concerned about making the payments, but you’re also depriving yourself of dollars that could be used to invest for your future.
Try to do everything you can to live within your means and avoid racking up more debt than is necessary. And when you do whittle down your debts, put that “found” money to work. The more you put in your investment portfolio, the more opportunities you have to reach your objectives.
• Free your thinking about the future. Here’s another roadblock on your journey toward financial independence: short-term thinking.
Instead of seeking quick gains (which are notoriously hard to achieve), strive for steady growth. Instead of reacting to the news of the day by making impulsive moves, chart a long-term strategy that’s appropriate for your needs, and stick to it.
Instead of focusing on the losses you might see on one month’s investment statement, look back over the progress you’ve made over the last five or 10 years. In short, worry less about today – and plan for tomorrow. It will take a lot of time, effort and patience to ultimately achieve your own Financial Independence Day. But once you do, you’ll have reason to rejoice – and you won’t even need the fireworks.