Financial Independence: Where Do I Start?
What does financial independence mean to you? Whether you are trying to build a nest egg for retirement or setting a new budget goal, there are many way to define independence. Thankfully, there are plenty of tools and resources to help understand what steps to take to achieve it. Let’s break financial independence down and find out what it means for you.
For starters, financial independence doesn’t mean that you wake up one day, and you’re able to pay off all your debts. Instead, financial independence should be viewed as a process that eventually leads to self-reliance.
Create an Action Plan
Because financial independence is a journey, the first step should be realizing that you need a personalized financial action plan. Ask yourself what financial independence looks like for you over the next year, the next 10 years, or even the rest of your life. Define it for yourself and work from there. For example, your first step toward financial independence may be increasing your income and creating a budget for yourself. The next step may be paying off credit card debt or a car loan. Once you have immediate steps, you’ll also need to define your long-term financial goals.
Invest More
After you’ve created a financial plan for yourself, you should look at the way you’ve been spending and find ways to cut back. It can be as easy as eating out less or eliminating finance charges by avoiding late fees. Spending less and living below your means is an important part of learning financial independence. With the money that you’ve saved by cutting back, consider investing. Even if you’ve never considered it, investing is a great way to gain money knowledge and help achieve financial goals for your future. Some financial experts suggest investing radically but even small, conservative steps can add up over time.
Save Less
This doesn’t mean don’t save at all. You want to have money in the case of an emergency, a job loss, or even a large purchase, but don’t get so busy saving that you forget to build a financial plan for your future that enables you to worry less so that you are not living paycheck to paycheck.
The truth about financial independence is that it looks different for everyone. What you save, invest, and spend will look different than your neighbor. Be sure to ask for advice to avoid common financial mistakes, but remember that no one is perfect. Financial independence may seem complex, yet it can help lead you to newfound freedom and excitement!
Registered Representatives offer securities and Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc. Member FINRA/SIPC.
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