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 behavior
- Stop consuming and start producing
- Read the right books
- Meet helpful people
Part 4: Stop consuming and start producing
Becoming financially independent in this way is about creating the right mindset and taking concrete action. We assume that consuming costs money and producing makes money. Spending less money and at the same time improving income potential is also part of developing good financial behavior as described in part 3 of this series of articles.
Of course, it is not possible to stop consuming altogether, and that is not the intention. In the first instance, it is about becoming aware of unnecessary expenditure, and what impact this has on your disposable income. You will find out that in practice you need less than you think. In today’s society, however, there are many people who are continuously broke while trying to look rich. However, having the latest Nike shoes or the latest model iPhone is not important. Money left over every month can be invested and used to achieve your future financial goals.
Imagine if you decide to postpone the purchase of the latest model of smartphone for a year, and you save 500 euros. Imagine investing these 500 euros in shares or in an ETF (Exchange Traded Fund) with an average annual return of 7%. After 20 years, these 500 euros would have grown to a capital of almost 2000 euros.
You may wonder where you could consume less. In order to find this out, you need insight into your spending. Try to write down for a month what you spend your money on. Also look at your bank statements and all the amounts that are debited from your account each month. After you have made a good overview of your monthly expenses, you can evaluate and draw conclusions.
Of course, you will have to decide for yourself which expenses are unnecessary or avoidable. A good example is the money you spend on food “on the go”. I know from my own experience that a coffee you buy on the way to work, and a small meal you have at lunch, can quickly cost you 10 euros. This while it is just as easy to take coffee and food from home for lunch. If you assume 20 working days a month, and you would spend 10 euros a day on food outside the door, that would be 200 euros a month. Seen on an annual basis it would even be 2400 euros. Differences that seem small at first, therefore, can have a big impact.
Starting to produce
There are many reasons why it is more interesting to produce rather than consume. By starting to produce you actually change your mindset from consuming to producing. Producing usually means being positive and using and exploiting your knowledge and skills. Producing also ensures that you add value and are more satisfied with your work or what you produce. The value you add in the form of a product or service can be converted into financial resources (money).
This is how you can start producing
If you want to produce a product or service, you will of course have to take the initiative. Try to start from your existing interests, knowledge and skills. To be entrepreneurial, you really don’t need to start a business. Maybe you are already brewing Indian Pale Ale (beer), and you notice that there is more and more demand for your product.
A product can be physical, such as a handmade piece of furniture, but also digital, such as an online marketing course. The same applies to services. Products and services can be offered physically (e.g. in a shop) or digitally (via the internet).
The best place to get inspiration about which product or service you could offer is the internet. There are literally millions of people who earn money every day with their online or offline product, service or side hustle. There are actually no limits to what products and services you could come up with.
Here are a few examples
- Sell products on Ebay or any other online marketplace
- Eating and Drinking
- Print-on-demand clothing label
- E-books and online courses
- Affiliate marketing
What does it yield?
The most important thing is to change your mindset from consuming to producing. After all, consuming costs money and producing makes money. In addition, it is a pleasant feeling that your satisfaction does not only come from the things you buy (consume). People who produce are often more positive and think mainly in terms of possibilities.Leave a comment