Financial independence begins with taking a hard look at your overall finances and understanding where you are now and where you need to be. Do you find yourself with a pile of debt and a negative cash flow at the end of every month? Have you even begun saving for retirement? You can make a positive change. Start today by reading our 8 tips to achieve financial independence.
1 Understand where you are now financially
Financial independence begins with an honest assessment of your current financial picture. Total all of your income streams in one column, then total your savings in another. Compile a list of all of your debts. Include mortgage and all other loans. Then make a listing of your monthly expenses. Does your income cover your monthly expenses and debt payments, or do you fall short? Are you overwhelmed with debt? Do you have sufficient savings? Getting the figures down on paper can give you a better picture of where you are.
2 Do you have any immediate financial goals?
This may include goals such as saving for a new home or your children’s education. Achieving financial goals will take an increase in savings and should be considered in the overall picture.
3 Create and maintain a workable budget
Apps such as Mint are a fantastic way to track your spending and stick to a budget. Mint is free and easy to use, with features including automatic transaction categorizing. It will also send you alerts when you go over budget, which is important since the goal is to keep your expenses below your income. Two budgeting apps available for a fee that are also popular include PocketGuard and YNAB (You Need a Budget).
4 Cut back on your expenses
One of the easiest ways to achieve financial independence is to cut way back on your expenses. Once you learn how much you are spending and on what, it will be easier to evaluate your needs and eliminate some of your wants. Living within your means is important. The less you spend, the more you can save.
5 Pay off debt
Almost everyone has some type of debt. If you don’t get in over your head and make all of your debt payments on time, debt isn’t necessarily a bad thing. Concentrate on paying off your credit card balances and keeping them low. Focusing on paying down debt can help you achieve financial independence faster.
6 Increase your income
If your pay is not keeping pace with your expenses, it may be time to look at opportunities to earn extra income. This could mean asking for a raise, picking up extra shifts at work, or starting a side hustle. Read our “Ultimate Side Hustle Guide” for some ideas to help you get started.
7 Save for a rainy day, for short and long-term goals, as well as for retirement
Saving is an essential part of achieving financial independence. Not only for the goals you hope to achieve, such as funding education, but also for an emergency, and for retirement. Many experts recommend three to six months of your salary be saved in an emergency fund, so you are prepared when the unexpected happens. Only use your emergency funds for true emergencies. A family trip to Mexico does not count as an emergency, but a furnace in need of repair does. Set your savings to autopilot by having a portion of each pay automatically deposited into select savings accounts. You can earmark an emergency fund, a vacation fund, and more.
Saving for retirement is also extremely important in gaining financial freedom. Are you on par with where you need to be? Read our “Guide to Retirement Savings by Age” to find out. If not, it’s never too early or too late to start saving for retirement. Here are ten “Tips to Catch Up on Retirement Savings.” In conclusion, building sufficient savings is one of our most important tips for achieving financial independence.
8 Consider investing
Speak to a trusted financial advisor about the benefits of investing. There are many opportunities for investing, from stocks and bonds to mutual funds, as well as investing in real estate.
Financial independence is gained through staying focused, remaining consistent, and working hard. It may mean sacrificing now for a more secure financial future. We hope our tips help. Read our “7 Steps for Creating a Budget You Stick to” for more helpful tips like these. Benchmark Credit Union may be able to help you achieve financial independence. Confused about the difference between banks and credit unions? Read our blog “Busting Credit Union Myths.”