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7 Reasons to Achieve Financial Independence

Author Greg Davis

In the personal finance journey, few concepts have garnered as much attention and interest as the FIRE movement – an acronym for Financial Independence and Retiring Early.

Financial independence means your savings and investments are substantial enough to cover your living to fund your everyday life. To Retire Early completes the FIRE acronym. It involves stepping away from the traditional work routine and embracing a more flexible and fulfilling lifestyle.

Even if you love your work and don’t want to retire, financial independence is a goal everyone should have; it gives you options, leverage, and the potential for so much more.

In today’s article, we’ll discuss the main benefits of being financially independent and provide some tips on how to get there.

 

1. You build and protect your credit

When you become financially independent, you are in charge of your credit, which means that you can build up your credit score by making smart financial decisions. You can also protect your credit by monitoring your credit report and dispute any errors that you find.

As noted in a prior article, it is particularly important to look at your credit reports at least annually, as the data in these reports influence your credit score. This score is critical as it determines how much money you will spend on interest for loans, credit cards and automobile financing.

It is recommended that you check your credit history report for each credit bureau (Equifax, TransUnion and Experian) at least once a year. To do so, go to AnnualCreditReport.com and select “request your free credit reports.” Alternatively, you can call 1-877-322-8228. You can choose to download the reports or have them mailed to you.

 

2. You can save money

When you are in charge of your finances, you make decisions about how best to save your money. You can choose to save for retirement, an emergency fund, or a major purchase like a house or a car. Having financial independence means that you do not have to worry about where your next paycheck is coming from. This gives you the ability to focus on saving your money and reaching both your short-term and long-term financial goals. While not for everyone, one of the best ways to save money is to create a budget and stick to it.

Another fantastic way to save money is to invest in yourself by taking courses or learning new skills that can help you earn more money. Early in my career, I took an MBA course as well as studied for numerous certification exams in my field of accounting/finance to earn such designations as CPA, CMA and CFM. All of these aided my career progression to the management level.

Finally, you can also save money by taking advantage of discounts and deals. As a cheap accountant (that’s what my wife calls me!), I love discounts, sales and deals on products and services. For example, we buy well over $1,000 of gift cards when the holiday specials are offered so that we gain 30-40% more value for our favorite restaurant groups here in Philly.

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3. You can make your own decisions

When you’re financially independent, you do not have to rely on anyone else for money, which means that you can make your own decisions about how to spend your money. You are not beholden to anyone else’s opinion about what is best for you and your family. You can choose to spend your money on whatever you want or need, which is a great feeling of freedom and independence. Of course, it is important to make smart financial decisions. But you get to decide what is best for you! 

My wife and I worked hard to earn our salaries as we both put in long hours to achieve our financial independence. Our career progression as well as collaborating closely with a financial advisor starting in our 40s were the keys to our financial success. But the freedom to make our own decisions on how best to spend our money was worth the arduous work. In addition, we have been fortunate to help close friends or family members when life handed them some lemons. 

 

4. You can achieve your financial goals

Whatever your goal is, you can achieve it when you oversee your finances. Having financial independence gives you the ability to make smart choices with your money and reach your goals. For example, let’s say that your goal is to save for a down payment on a house. You can do this by creating a budget and sticking to it. You can also make extra payments on your debts so that you can free up more money to save. 

Or, if you are trying to pay off debt, you can create a “Debt Snowball” plan and focus all your extra money on paying off your debts. This is exactly what my wife and I did to pay off an onerous jumbo mortgage on a vacation home we bought in 2005.

Whatever your goal is, you can achieve it when you are financially independent!

 

5. You can live a stress-free life

One of the best reasons to become financially independent is that you do not have to worry about money, which leads to a much more stress-free life. When you are not worried about money, you can focus on the things that are important to you, such as your hobbies and spending time with your friends and family. You can also travel and explore new places. Financial independence gives you the ability to live a stress-free life and enjoy your hobbies without worrying about money.

While working, my wife and I took numerous trips to the beautiful beaches of Outer Banks, NC. Sometimes we did this as a relaxing couple’s getaway, and we would go with a larger group of close friends and family members on an annual basis each fall. We are also huge college basketball fans. Thus, we would attend one of the rounds of the Men’s NCAA Basketball Tournament in various locations across the country. We loved to travel and discover new cities during our version of “March Madness”!

 

6. Greater financial security

Job security is increasingly becoming an illusion. Unless you are my best friend, Bryan, who has worked at the same company for over 42 years, a job for life doesn’t really exist anymore. Being financially independent means you are in a better position to ensure you don’t find yourself at the mercy of these factors. 

When you are financially independent, you can choose roles that suit you rather than being dependent on a salary. Despite facing many obstacles in my career change at age fifty-three, I persevered and fulfilled my dream of teaching at the college level while increasing our happiness as a couple. I had no idea I would teach at the prestigious University of Illinois for the next seven years and have the most rewarding experiences of my forty-year career. From a financial standpoint, my wife and I had done all the right things to build a healthy retirement nest. Our years of saving and investing allowed us greater flexibility to seek other opportunities and rewards than what our current jobs offered. 

 

7. You can retire early!

But the best reason to achieve financial independence is that you can retire early. While not for everyone, if you do not want to work for the rest of your life, you do not have to! You can save up enough money so that you can live comfortably in retirement. This is a wonderful way to enjoy your golden years and do the things that you love. 

Remember, it is never too early to start saving for retirement. The sooner you start, the more time your money has to grow. I learned one of the most powerful personal finance lessons early in my career, compound interest, which is earning interest on top of interest, according to Investopedia. No wonder it’s been named as the “8th wonder of the world.” 

From the start of my career at Hershey, I contributed to the company 401(k) plan and took a minimum of 6 percent from my paycheck to maximize the Company match, which was 50 percent of my contribution, or an additional 3 percent. My 401(k) balance and wealth grew substantially over the years because of this compounding impact. 

It can be difficult to retire early, but it is possible if you are financially independent. Sadly, many people need to retire early due to health reasons. But even if you are healthy, you might want to consider retiring early so that you can enjoy your retirement years while you can.

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Final Thoughts

It is challenging to become financially independent as you might have to give up some of your favorite things to save money. For example, you might need to cut back on eating out, purchasing a new car, or online shopping. You might also need to get a second job or invest in a side hustle (like writing articles for POF!). 

But if you are willing to make these sacrifices, you can become financially independent. 

Share your reasons for becoming financially independent in the comments below!



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2 thoughts on “7 Reasons to Achieve Financial Independence”

  1. By far, the most effective and reliable means to reach our maximum and ultimate bolus of income on the road to independent wealth levels is snubbed by medical school education pundits, has been purposely keeping medical students away from business knowledge education, is the one universal and valid pathway for physicians ever to reach their medical practice income they have worked and studied to attain, and yet continues to be totally rejected by the medical school education scholars and all practicing physicians. A business education available to medical students while in medical school has been and still is the one thing that can relieve or prevent almost every money problem, stress, burnout, and suicide of physicians. And it is the primary factor that is destroying private medical practice and physician attrition in our nation, among others almost as severe. Instead of helping poor physicians earn more income using outside work and jobs, they ought to be taking business education courses and reading business education books to finally understand how all successful businesses survive and thrive in the business world–which they are purposely not taught the truth about. Without business education essentially all physicians will fail in their practice to some degree. Then multiply that by 1.2 million in medical practice in our nation today. It’s an issue that can prevent Socialized Medicine from being adopted. Who is fighting for our survival financially??

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