Financial independence is a state of being where your passive income from various sources (like dividend stocks, rental properties, and online businesses) exceeds your monthly living expenses. This can be accomplished by combining strategic investing with disciplined saving and budgeting. Individuals who achieve this goal enjoy freedom to pursue passion projects and activities, travel, and make decisions based on their values without the need for a traditional job or outside sources of income.

Financial independence through investing a strategy to achieve financial independence through investing requires careful planning and execution. You’ll want to prioritize paying off debt and reducing spending, build an emergency fund, and save as much as possible in order to reach the point where you have surplus income. Once you’ve eliminated debt and built up savings, you can begin to invest for the long-term. It’s best to start early, as the power of compound interest can greatly accelerate your growth potential. The longer you wait, the more you’ll lose in lost opportunity cost.

The Smart Investor’s Guide to Tax-Efficient Investing in the UK

The goal is to save between 20% – 80% of your after-tax income, and maximize your pre-tax retirement accounts each year. You’ll need a consistent, long-term real investment return of 5% or more in order to reach financial independence. However, this is a very challenging target to hit with a traditional savings account, especially in the face of inflation. It’s important to continually monitor your progress, and reevaluate your plan periodically. This will ensure that you’re on track to achieve your goals, and allow you to make any necessary adjustments.