How to Become Financially Independent

“To become financially independent you must turn part of your income into capital; turn capital into enterprise; turn enterprise into profit; turn profit into investment; and turn investment into financial independence” -Jim Rohn

Notice that the entire concept of Financial Independence is broken into six different categories that I have listed below.

We have not implied that you will become financially independent overnight, but it takes a great emphasis on the idea of breaking a huge goal, like becoming financially independent, into small manageable pieces, the same concept you should use with any goal you have.

This is how you break into small pieces the huge goal of becoming financially independent:

1. Income: You are working for someone else, in a 9-5 job. You do not have real flexibility nor expect a huge raise over the next years, but you can start saving some money to create the capital that you need to start a business. This capital could be anywhere from a few hundred dollars to a few thousand or more, depending on what type of business you want to start, your expertise, skills, education, etc.
2. Capital: Saved some income and got some capital, now you can start your own business, and pay for the initial expenses; perhaps with your savings or with someone money from someone else (Venture Capital, Family members, Bank, Credit card companies). This Capital is going to be the foundation of your Enterprise or Small Business, which is the vehicle that will allow you to become your own boss and the master of your time. It will also allow you to have more time to spend with your family and kids; which is an immense player when talking about anything independent.
3. Enterprise: Call it your Small Business, home-based business, or part-time business to begin with; it does not matter. You are halfway through the process of becoming financially independent, and your glass is half full and getting fuller every day. Hopefully, you have a good team and mentors to make your enterprise such that will produce the profits that you are looking for. This Enterprise should also fulfill most of your needs in order to contribute to the ultimate purpose of your life: Happiness. This is why is so important that you do not elect a business for the money, but for the passion you have for it. The money will follow!
4. Profit: Once you find that passion and niche market to service, the profits will come. The profits should be such that you are able to not only run your business without debt but also give yourself a salary and start saving again. This time the savings will be directed toward the investments that will secure your financial independence. Do not make the mistake of working for free for your business in the long run. Remember, the main financial objective of any business is to make profits for the owner.
5. Investment: There are several types of Investment you should consider, being the stock market the most commonly known alternative, and one that you should consider; but leaving it to the experts. Do not try to buy and sell stocks, rather get a financial adviser that will plan your retirement and will tailor your investments to your requests and needs. Another thing that you should consider is reinvesting in your company or another company. You know that the stock market will give you around 8% return per year (as per the historical return has been over time), but if you have a business that is giving you a return on investment of 13%, you perhaps should reinvest the money in your business. The same was with Real Estate when you were able to get those phenomenal returns, not to say that perhaps now is a great time to buy and get a great return in a couple of years. The key to knowing what and how much to put in each bucket is not a mathematical formula, and it will vary from woman to woman. Keep in mind that diversification is crucial to ensure you are mitigating your risks and whatever you do, make sure you know exactly what is that you are doing and feel comfortable with that decision.
6. Financial Independence: First key to achieving financial independence: Defining it! When my clients tell me they are setting a goal to be financially independent, the last thing they expect me to tell them is that they need to redo their goal. The reason for this is, that becoming financially independent is not a specific and measurable goal, therefore is not rewarding; not to mention it does not have a timeline attached to it.

Take a moment to write down your goals and the way they will empower you to achieve them. Define your goals as specifically as you can, and make sure you have a strong reason behind them because that is the only way you will have the driving force to push you toward your goals.

Carmen Shearer, founder of Entrepreneur Women Coaching and Training, LLC; a company dedicated to empowering women entrepreneurs by helping them overcome their fears and achieve their dreams. http://www.entrepreneur-women-coaching.com.