5 powerful steps towards financial independence and retiring early

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Many people dream of retiring early with enough money to be able to do as they please for the rest of their lives. Turning that dream into reality is possible, as long as you take it seriously and commit to taking action.

I reckon that if you take these five steps you’ll be well on your way to creating the conditions necessary for you to retire early and be financially secure. It probably won’t be easy to achieve, but with persistence and determination, I’m sure you can make it happen.

1. Believe you can do it

Many fail to achieve financial freedom because deep down they don’t really believe they can do it, so they end up fighting against self-sabotage.

Accumulating a fortune seems like a daunting task when you are at the beginning of the journey, and I reckon many people have a tendency to give up in a thousand little ways along the way. Perhaps you end up blowing your savings on that holiday of a lifetime. Perhaps you keep on doing that kind of thing. If you’re striking for early retirement, that’s self-sabotage.

To be successful, I think step one is to adopt a mindset of belief and determination that will guide you on your journey and help you make better choices along the way.

2. Take control

With your can-do mindset in place, step two is to grab your finances by the whatsits and get in control of debts and outgoings with the aim of living below your means. It’s a well-touted concept, but it works.

Spend less than you earn and cultivate a saving habit. Plan to save, and work your plan as hard as you can. If you do that, the magic starts to happen.

3. Toughen up

This is like step two, but magnified then put into action and underlines just how important control of your money is. With your domestic finances working better, step three is to really toughen up and act decisively, bearing down on personal outgoings and making hard choices. Hone the management of domestic finances until they work like a well-oiled machine so you can squeeze every penny possible out of the leaky bucket and direct it towards your dream of financial freedom.

I’m not suggesting a life of total abstinence and austerity, just a measured, balanced and controlled approach to your finances with you firmly in charge. Every pound counts because those pounds will compound over time into many more pounds.

4. Earn and build

Now that you’ve fixed all the leaks in your domestic budget step four is to direct your creativity to earn more income. Direct the surplus you earn straight to building up your savings and don’t be tempted to self-sabotage by raising your standard of living and spending if you are already enjoying a happy and fulfilling lifestyle.

5. Put your capital to work

After applying yourself to building up your saved capital, step five is to make that money work hard for you by looking for ways to compound it, such as investing on the stock market.

Over time, shares have outperformed all other asset classes and you can get involved by using such vehicles as low-cost index tracking funds, managed funds, directed stock-picking services such as those offered here at the Motley Fool, or by embracing the concept of private investing completely and picking your own shares and investments.

The fastest way to a million

A long-term and focused approach is key to building wealth. If financial independence is your ambition, the Motley Fool can help and our analysts have developed this brand new free report called The Foolish Guide To Financial Independence.

It’s full of tips to help you create wealth and is entirely free and available for download today with no further obligation. So, if you’re determined to free yourself and achieve financial independence, click here to download the report. You’ve nothing to lose and it might change your life.

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