A lot of people wonder what true financial independence is. In my definition financial independence is having enough money so that in the event you lose your job you are not worried about being unable to pay your bills.
This can be accomplished various ways. You can have enough in savings and investments to cover multiple months of expenses, enough passive income to meet your minimum monthly expenses, or you could have cut your expenses so you can live on less.
To be independent you really need to do all three of these things.
Cut Expenses
The first thing everyone should do is learn to cut their expenses so that they are living on 60%-70% of their take home pay. The beginning of this process is creating a budget and sticking to it. In your budgeting process you need to identify places you can cut expenses and place the money you save into a savings account.
The two most identifiable places to cut are food and gasoline.
To use less gas these are ideas that have worked for me.
1. Run errands one day a week.
2. Do not take multiple vehicles to the same location.
3. Do not speed as this can cut your gas mileage by 10%-20%.
4. Make sure all excess weight is taken out of your vehicle.
5. Take your lunch to work so you are only driving to and from work (this will also save you money in food expenses).
To cut back on food try the following ideas:
- Plan a menu monthly and make one shopping list to purchase ingredients that are on the menu and only purchase what is on your list.
- Only go to the grocery store once a week and purchase one extra of staples (milk and bread) to ensure that you don’t have to go back.
- Take your lunch to work.
CouponMom has some great ideas on how to save on groceries and has a weekly ad price list for several grocers around the country and tells you what is on sale and what coupons are available for those products.
Learn to identify bargains for things you will need. I purchased 2 button down shirts and a sweater last night from Belk’s department store for $15. Use stores or programs that offer discounts like UPromise
, Sam’s Club 0r Costco.
If you make the effor it’s amazing how much you can save. I have cut my gas budget by $150 per month and my grocery budget by about $300 per month.
