Financial independence means different things to different people. For some, it means having a savings account that’s flush with cash, or building generational wealth that will change their family’s future. For others, it’s a life free of credit card debt and mortgage payments, or a life full of travel. The definition is uniquely yours – depending on your long-term financial vision.
Achieving financial independence is attainable with clear steps and a strong focus. It starts with setting goals; creating and managing your budget; paying down debt and saving; and evaluating your progress regularly.
Whatever financial independence means to you, today is a good day to start developing habits that will help set you up for a solid financial future. To help you start, here are four simple steps that you can take today to better manage your money and give you better peace of mind.
Step 1: Set achievable goals. The first step to achieving financial independence is to define what that means to you. What does your ideal lifestyle look like? Does a specific idea or goal come to mind? If so, think about it as something you can work toward. Perhaps it’s early retirement or eventually downsizing to a less expensive living situation, which leaves more flexibility in the near-term.
Having a better sense of your future desires will help you set more achievable goals – short-term, midterm and long-term – a crucial first step to achieving financial independence. Know what you’re working toward and then you can plan around that – your budget, debt management and investments.
Step 2: Create and manage your budget. Once you’ve set goals, create a budget. Your desired lifestyle will help you decide how much money you need to allocate to assets like savings, retirement and investments to reach your goals on time. View budgets as a living document that fluctuates over time as spending evolves from month-to-month.
This could be a good time to work with a financial advisor for a more holistic approach to your finances. Your strategy is unique to you, so your advisor should evaluate your full financial picture and offer research-based recommendations on investing, banking and lending needs. Your advisor will also explain how certain life events and market cycles might affect your path forward, and help you adjust your strategy to stay on track.
Step 3: Pay down debt and start saving. It’s difficult to be free of financial hardship when you’re burdened by debt, and rising inflation and interest rates have fueled a 13% cumulative year-over-year increase in credit card balances. Paying down debt is an essential component of your financial independence, and more than eight in 10 (83%) Americans prioritize paying down debt rather than saving for the future.
While paying off debt is important, establishing savings is also a critical component of financial freedom. It can be the cushion you need for unexpected expenses or emergencies that arise. Building savings doesn’t just happen though, you have to be intentional about putting money aside. Big goals start with small progress: If saving seems overwhelming, start small by committing to putting aside one dollar every day. At the end of the month, deposit that $30 into your savings account and start the next month with the same strategy – you’ll be shocked at how much you’re able to save over time if you stick with it. And with automatic tools like Chase’s Autosave feature, you can schedule transfers from your checking account to your savings account, at an amount and frequency that’s most comfortable for you.
Step 4: Evaluate your progress. Assessing your spending with what you planned to spend on a regular basis will help you better manage your spending habits, adjust your savings and monitor progress toward your long-term financial goals. It will also provide valuable insights into the areas where you’re spending the most money and if there is opportunity to revise. Review your budget regularly and monitor and evaluate your spending habits at least once a month.
Remember, achieving financial independence takes time and it’s important to regularly look for areas of improvement and determine what’s working and what’s not. Over time, you’ll find that managing your finances will become easier and more effective, creating a better financial future.
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