How to Achieve Financial Independence in 5 Simple Steps
Before retiring, financial blogger Mister Squirrel created his own version of Maslow’s hierarchy of needs. Mister Squirrel took the original Maslow’s hierarchy of needs chart, a pyramid based on the primary human needs for psychological well being, and applied it to the primary human needs for financial success. Read on to see Mister Squirrel’s Hierarchy of FIRE (Financially Independent and Retired Early). These principals will take you from “surviving” to operating as a financially liberated woman with a passive income stream.
“If you think that the government will look after you, money will take care of itself, or you’ll win the lottery, then you’re not thinking about money correctly,” says Mister Squirrel. In order to put yourself on the path for success, you need to make sure that you’re living below your means (i.e. spending less than your monthly income).
If you have bad debt clinging to you, get rid of it. You can’t make forward progress without clearing debt that costs you money without giving you any clear value in return.
Once you’ve got your past and present financial situations squared away, now is the time to look forward. Start a rainy day fund and educate yourself on how best to invest your money.
Put your learning phase into action and start investing. Only do what is best for your savings and your financial goals. It’s best to work with an expert. Investing should continue throughout your life in order to build a robust passive income stream.
Tweak your investing plan to perfection so that passive income streams cover all predictable expenses. Make sure you plan for taxes, check the ebb and flow of your accounts, and set up your will.
To read about the final stages of financial independence, visit Business Insider.
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What do you think about Mr. Squirrel’s hierarchy of FIRE? Share your thoughts in the comments!
Opening photo: via Le 21eme