You Too Can Have Financial Independence
August 30, 2011 | Alliant Credit Union
Financial independence is defined as "the state of having sufficient personal wealth to live indefinitely without having to work actively for basic necessities."1 Doesn't the idea of not having to worry about money sound nice? All of us are working towards financial independence to some level with varying goals and definitions of what it means to us, while also being in different stages. Whether you're at the beginners, intermediate or advanced stage, here are steps to help you reach your goals:
Develop A Plan
The first step in working towards your goal of financial independence is setting goals: short-term, mid-term and long-term goals. Set aside time to think about what financial independence means to you. Once you've defined it, determine what you can do along the way to reach it. It needs to include specific goals, dollar requirement, time frame to achieve each and review periods to evaluate where you're currently at and if you need to adjust your plan due to changes in your life, such as marriage, children, etc.
Pay Off Debt
Pay off all of your debt, mortgage, credit card, car and student loans, to reduce monthly expenses. Not having to pay these monthly expenses will allow you the opportunity to put more towards increasing your savings and obtaining financial independence.
Stop buying things and signing up for things you'll forget about or never use. Do you really need another lip-gloss or set of baseball cards? No. Are you using the satellite radio or Netflix enough to validate the monthly expense? No. Help make this doing this easier by thinking of every dollar you earn as an opportunity to be one step closer to obtaining your goal of financial independence. Learning how to control your spending is important.
Save, Save, Save
Make saving a priority and you'll eventually accumulate wealth, develop financial discipline and learn how to stretch your dollar creatively. The easiest way to make sure you save is setting up a percentage of your check to automatically go into your savings account on payday, setting up monthly automatic transfer from your checking to your savings or a combination of both should you have multiple savings accounts.
You should also start or continue to add to your retirement savings. For tips to get you on the right foot and saving for retirement, read Eight Tips For Planning Your Retirement.
Ask For Help
Obtaining financial independence isn't easy and you don't have to do it alone, so ask for help. Ask for help from friends and family that are knowledgeable in personal finance or seek help from a professional on the best approach for you. One benefit of asking for help is that it can provide you a support system in identifying and saying no to vices that are preventing you from reaching your goals, such as credit card usage and lifestyle habits.
What is your definition of financial independence? What steps are you taking to reach your goals? Leave a comment on Facebook.
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Sources: FrugalDad.com, Fool.com
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