Saving more than you earn is crucial for achieving financial independence, boosting your income is essential to expedite the journey towards financial freedom.
Deep dives
Focus on Savings Before Earnings
Saving more than you earn is crucial for achieving financial independence. The foundation of financial independence rests on the ability to save and invest a portion of your income. No matter how much you earn, if you spend more than you make, financial stability will remain elusive. The importance of saving can be likened to maintaining a healthy diet in fitness, with savings being the equivalent of eating the right foods. While earning more money is beneficial, increasing savings should be a primary focus.
Increasing Your Income
Boosting your income is an essential but often overlooked aspect of achieving financial independence. Many individuals neglect opportunities to enhance their earnings, which directly impacts their savings rate. Even a slight increase in income can significantly impact the time it takes to reach financial independence. By combining efforts to save more and earn more, individuals can expedite their journey towards financial freedom.
Balancing Savings and Income Growth
Finding the right balance between saving and increasing income is key to accelerating the path to financial independence. While optimizing savings is crucial, there are limitations to how much one can save efficiently. Similarly, there are diminishing returns when solely focusing on raising income. By striking a balance between saving diligently and actively seeking income growth, individuals can maximize their progress towards financial independence.
There are an array of factors that contribute to a solid FIRE strategy. Arguably, though, none are more important than saving. Sure, increasing your salary can give you more money to work with. However, if you don't form savings habits, your earnings may not bring you closer to your FIRE goal.
In this chapter, Aussie Firebug explores some of the most popular and proven methods to increase your savings rate. He also discusses how an increased income can bolster your savings rate once you've established your healthy money habits.
If you'd like to read along, you find the written chapter here.
Any advice is general and does not consider your financial situation needs, or objectives, so consider whether it’s appropriate for you. You should also consider seeking professional advice before making any financial decision.
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