Let’s Cut to the Chase

At the risk of generalising, one might be inclined to say that financial independence lies at the heart of everyone who works for a living.  Indeed, such a noble objective seems apropos given the many years of sacrifice that we make in our productive lives.  However, working in itself does not guarantee financial independence.  Nor does it provide safeguards for the future.  We live in a world where job security is all but absent, with companies able to hire and fire at will.  Gone are the days of lifelong employment: enter the current job market where burgeoning numbers of skilled professionals are competing for a limited number of opportunities.  Perhaps this is a pessimistic perception of the workforce, but better to err on the side of caution than to provide false hope.  Hope for the best and plan for the worst is an idiom that many people now live by.  But precisely how you can work towards financial independence in an increasingly competitive world is in itself a challenge.

Self portrait – Big bathing by MattysFlicks, on Flickr.  This work is licensed under a Creative Commons Attribution-NonCommercial 2.0 Generic License.

Debt:  The Silent Killer

If you are spending more than you are taking in, you’re operating at a deficit.  That’s common sense.  However, not everybody understands that each line item that contributes to your overall debt burden is not entirely necessary.  For example, subscriptions to magazines, service providers, unnecessary additional insurance, premiums for defunct policies, bank charges, unnecessary utilities services, and the like can be removed entirely or reduced substantially.  Things like restaurant visits, take-outs, visits to Starbucks and all manner of other expense items are optional.  Once you get a grip on what is needed and what isn’t, you can start taking control of your financial future.  And once you do, start with your credit cards.  With an imminent rate hike expected in the US, followed by Canada and the UK, you will want to get ahead of the game before rates increase.  Since most people own multiple credit cards, the easiest way to see progress is to kill the debt on your lowest credit card.  In other words pay it off and move on to the next highest credit card.  This way you will see incremental progress in your debt alleviation efforts.

How Do You Manage Your Financial Independence?

Manage your spending wisely and you will soon find yourself at a surplus by the end of the month. Excess funds – personal disposable income – can be put to good use in any number of ways.  If you’re trying to build financial independence you may wish to consider catering to your strengths, and not your weaknesses.  In other words, if you have a knack for understanding the markets, you may wish to dabble in stocks, binary options or simply add a greater percentage of your disposable income to your 401(k) retirement plan.  You get to keep more of your money when you put more of it away in tax-deferred accounts.  Retirement accounts in the form of IRAs, 401(k) etc are a great choice.  But caution is the order of the day, since we are at a volatile juncture in global equities markets right now.  If safety is your primary concern, you may wish to stick your money in fixed interest-bearing accounts like CDs, Treasury bonds and other high interest yielding investments.  Again, wait until the rate hike kicks in before locking your funds up for any period of time.

Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects.  Nowadays Brett contributes from his vast expertise for the globally renowned spread betting company Intertrader.