Most people would like to have the freedom to do what they want. We prefer to decide for ourselves what we do with our time, what we buy and where we spend our day. In reality, however, this is often only partly possible. In most cases, our work determines how we spend our time, and what we can do with the income we receive from this. So we are dependent on a job or our employer. Almost everyone will indicate that, in order to be able to do what we want, sufficient money is needed. So we think we first need to be financially independent to make this possible.
What is financial independence?
Financial independence is the status of having a reliable source of income that is sufficient to cover the cost of living for the rest of our lives, without being dependent on others. The income earned without having to work is also called passive income. So financial independence allows you to live the life you want.
Achieving financial freedom can mean something different for everyone. Achieving financial freedom, for example, can mean that you can retire early. It can also mean that you can devote your time to meaningful work, without having to pay attention to a career. It may also mean that you don’t have to think as much about making big purchases, such as a car, or you simply book a holiday to that distant destination you’ve always wanted to go to. So we can say that people who are financially independent have more options, and therefore live more freely with possibly less stress.
Achieving financial independence is not easy and can take many years. This is clearly not a strategy to get rich quickly. And people who are financially independent need to handle their capital responsibly to make sure they stay that way. First of all, we will have to become the type of person who is able to become financially independent. This includes discipline and the development of certain knowledge and skills.
In this 6-part series of articles we describe 6 ways that can contribute to achieving financial independence:
- Starting a business
- Become a trader and investor
- Develop the right financial behaviour
- Stop consuming and start producing
- Read the right books
- Meet helpful people
Part 1: Starting a business
People who are financially independent often turn out to be entrepreneurs and business owners, or former owners of a business. Having a successful business therefore seems to contribute to achieving financial independence.
There are several reasons to start a business. These can differ for everyone. For most entrepreneurs, earning money is the most important motivating factor. Entrepreneurs like to earn an income that is higher than that of a comparable paid job. By constantly building his or her business, an entrepreneur wants to add value and build capital. Think for example of (well-known) entrepreneurs who have successfully sold their business, and as a result have become financially independent.
The cash flow generated by a company can be reinvested. An entrepreneur can choose to invest money in his or her own company, or to pass part of it on to himself or herself as salary or profit payment. An entrepreneur can then use this money for personal investments.
Apart from financial reasons, there are a few other interesting reasons to start a business. Personal development plays an important role in this. Entrepreneurs are often people who take initiative, are innovative and think in terms of possibilities. Entrepreneurship will therefore also help you to become the person who is able to become financially independent. People with a business build on their own dream, instead of that of their employer.
This is how you can start a business
You can make starting a business as difficult or easy as you want. The type of business you want to start will also determine what you need and what requirements are involved. You can imagine that starting a delivery service for the elderly is easier to do than starting a factory to produce packaging materials.
You may have been walking around with the idea of starting a business for a long time, but for one reason or another this hasn’t happened yet. This is not bad at all. There has never been a better time to start a business than now. Through the internet the whole world is within our reach and locally we have a lot of opportunities to make our company known to our immediate surroundings. Age no longer plays a role either. Whether you are a student of 15 or a retired person, anyone who takes the initiative is in general able to start a business.
Entrepreneurship is therefore primarily a matter of taking the initiative. Start by setting clear, achievable goals. Then you need to take action to achieve these goals. It is important to know what the results of your actions are, so that you can constantly adjust them. So you need to remain flexible, learn from your mistakes and continue to build on what works well. Entrepreneurship is therefore also a matter of trial and error.
Tips and examples
Try to take your existing interests, knowledge and skills as a starting point when starting a business. What knowledge and skills do you already have that you could convert into money and turnover? These can be different for everyone. Maybe you know a lot about car mechanics or you have extraordinary communication skills. Maybe you don’t think you have specific knowledge and skills. This will not be the case. Anyone can do something. In this case, try to write down what knowledge and skills you have, and what your strengths and weaknesses are. Then try to think about what you could use the written down knowledge and skills for. Think big, but start with something that is within your capabilities and that you can manage. In theory, the kind of goods or services you could offer is infinite.
Approximately 20 percent of all starting entrepreneurs work in business services. This includes business consultants, accountants, career advisors/recruiters and IT consultants.
With 20 percent, personal services are also a popular industry among starting entrepreneurs. These include hairdressers, beauticians, driving school owners, dry cleaners, shoemakers, personal education and passenger transport.
Approximately 17 percent of all starting entrepreneurs start a hotel and catering business.
Approximately 14 percent of all starting entrepreneurs start a retail business. This refers to shops with a physical location. Approximately 6 percent of all new entrepreneurs start a web shop or e-commerce business.
Besides the choice for a specific branch, product or service, you will of course also have to investigate the (financial) feasibility of your business.
Side notes entrepreneurship
We have already mentioned that entrepreneurship is mainly a matter of initiative and trial and error. As an entrepreneur you will therefore encounter a number of bumps on the road, which you will have to overcome in order to move forward again. Entrepreneurship can therefore be quite a challenge for many people. Of course you can choose to do business full-time, but you can also set up your business as a lucrative side hustle.
Keep in mind that you don’t have to be an entrepreneur to be entrepreneurial. You can read more about this in the further parts of this series.