Five facts about financial independence – finder.com.au

As our longevity has increased over the past 100 years, so has our desire to live better lives, ones where we're not tied to a job for 40 or 50 years.

One of the greatest freedoms that we enjoy today is the ability to add value to society and collect wealth as a result.

The goal of many Australians today is to reach financial independence and this can be achieved by understanding some of the facts.

This may sound simple, but dont underestimate its importance. If you spend more than you earn, youll always owe other people money.

If youre spending less than you earn, you should aim to save the difference. However, most Australians who save, save to consume, not to invest. Once theyve accumulated a tidy sum, they spend it.

Of course, no one ever saved their way to true wealth, its just too hard with todays low interest rates and tax eating away at the little interest you receive. The only way to take advantage of true money-growing opportunities is to invest in assets that grow in value and to recognise that becoming financially independent takes time.

If you continue to funnel money into your investment accounts, youll grow your wealth on a larger scale through the magic ofcompounding. You cant get much compounding if youre saving just to save (or to spend, like most people do).

Stay disciplined and keep saving so that you eventually have a big enough sum to invest in property or shares where your return will be greater than the paltry interest you get on your savings account.

Many people believe that a high-paying job will be their ticket to financial independence, but unfortunately theyre wrong. Of course its easier to become wealthy if you have a lot of money coming in, but as Ive already explained, you have to spend less than you earn to really become wealthy.

It seems like common sense, but studies have demonstrated that high-earning doctors are the group least likely to amass significant wealth. So use your income to buy assets that will grow in value and provide you with cash flow, things like well-located residential real estate or blue chip shares.

Wealth creation doesnt happen by chance. It takes a good plan and a team effort, so when it comes to taxes, get the best advice that you can afford.

Everyones tax liabilities are different, so you must consult a professional who understands your personal situation. There are myriad tax deductions available to investors and business owners and its your responsibility to legally minimise your tax liability.

This requires a fine balance because you dont want to sacrifice tomorrow for today, but you dont want to be miserable today either.

Financial independence is a journey that requires some long stretches and it certainly requires patience. Enjoy your journey, because if you dont, its unlikely that youll enjoy the destination. If theres something that youve always wanted to do, dont postpone your happiness, because none of us can know what tomorrow will bring.

Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author and one of Australia's leading experts in wealth creation through property, and he writes the Property Update blog.

Picture: Shutterstock

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Five facts about financial independence - finder.com.au