When many of us think about achieving financial independence, we picture a cookie cutter future of retired bliss. But just as our lives are filled with unique decisions and experiences, so are our financial paths. Finding the right balance of savings, investments and budgeting for your life can help you reach your financial goals. Here are 5 keys to achieving financial independence in your life.
Whether you are starting your first job or have decades of experience under your belt, the key to achieving financial independence is to spend less than you earn. Following this golden rule will help you avoid financial stress, and starting a savings plan for your excess income will keep you moving toward your financial goals. As you acquire more responsibilities in the forms of buying a home, starting a family or preparing for retirement, your savings plan most likely will need to change, as will your spending habits. Keeping your savings plan flexible but still continuing to save is critical for achieving financial independence and staying that way.
If you are one of the 44.2 million Americans with student loan debt, achieving financial independence may feel out of reach, but your college debt doesn’t need to be crushing. Consider sitting down with a financial expert to create a big-picture analysis of your finances and a plan to help you pay down your debt. You will also want to avoid racking up other types of personal debt, such as credit card debt, by creating a household budget and sticking to it. If you’re lucky enough to have no college debt, it’s still a good practice to set down a monthly bill payment calendar so you know who you should be paying when with your paycheck. And then go in and sit with a financial expert who can help you with the complexities your debt might require.
It’s far too easy to fall in love with a home that’s out of your price range, creating a financial strain that will follow you for years to come. Before you buy your first home, know how much you can afford. That doesn’t only apply to the home itself, but also to all of the expenses that come with it such as taxes, insurance, improvements and more. Meet with a mortgage specialist and use an online calculator to determine how you can purchase a home you’ll love while staying the course to achieving financial independence.
You have probably heard everyone from your next door neighbor to your colleague down the hall talking about diversifying their investment assets, and each one likely offered a different recommendation for how to do it right. The truth is, no single investment is right for everyone. Whether you decide to invest in a vacation home, stocks and bonds or become a landlord, only you and your financial adviser can find the balance that works best for you.
An important but often overlooked tip for achieving financial independence is to keep an emergency or rainy day fund. You may be thinking, why would I keep extra cash around when I’m trying to save toward my goals? The answer is, because life happens. Opportunities arise to travel, enjoy unique experiences or sadly to have to cover the cost of the refrigerator that just stopped working beyond repair. Nothing can take the place of these special (and not so special) moments, so making sure that you have some financial cushion ready when you need it is paramount. You might want to consider starting a savings plan specifically for these occasions rather than reaching into your other accounts.
Achieving financial independence is a work in progress. Setting smart spending, budgeting and savings habits now can help you on your way to living your life with financial confidence. One of the most important facts to remember is that no single plan works for everyone. Talking to a financial adviser can help you find the right balance to help you reach your goals. Visit our FutureTrack blog for more advice, then come in and see us to pave the way for your financial future.