The Fourth of July is one of the most exciting and celebrated holidays as it marks the independence of our nation with the signing of the Declaration of Independence. As you celebrate with hot dogs, fireworks and pool parties this year, consider these five tips to start finding financial freedom of your own.
Many of us have a common goal of one day achieving financial independence. Financial independence gives you the personal freedom to do what you want. However, for many of us debt is a significant roadblock. In fact, the average adult has around $90,460 in debt.1 This includes all types of consumer debt such as credit cards, personal loans, student loans, mortgages and auto loans.
The good news is, there are strategies to pay down debt and work toward financial independence. How can you do this? Continue reading below as we analyze five actionable ways to start working towards more financial freedom this year.
Way #1: Make a Budget and Stick to It
Creating a budget is a great way to track your spending habits as well as track your progress toward achieving financial freedom. Setting a monthly budget is great for people looking to be certain that their bills will be paid and savings goals are on track. Creating a budget is easy, however sticking to that budget is difficult for many. If you’re used to spending and saving as you please, sticking to a strict budget will feel hard at first. But over time, consistency in your spending habits will make following a budget easy and natural. Holding yourself accountable can help deter impulse buys, splurges and make your savings goals a bigger priority.
Way #2: Pay off Your Credit Cards in Full
If you do not pay off your credit card payments in full each month, your debt can grow significantly due to credit cards high interest rates. If you’re able, pay off your credit card balance in full each month. Additionally, paying them on time will help you build good credit. If possible, it’s best to treat your credit card like a debit card, meaning you don’t spend more than you have. Once you have high-interest debt like this paid down, you can focus on low-interest debts like mortgages, auto loans and student debt.
Way #3: Opt for Automatic Savings
One of the most effective ways to save more money is to automate the process. Determine how much you’re able to contribute to your savings account each month and set up an automatic transfer with your bank. Soon, you will forget this automatic transfer is even happening.
Also, if your company offers a retirement savings plan like a 401(k), you may have the option to automatically defer funds from your paycheck to the account. Again, this is something that will happen without action from you. Automating the process makes it an easy and convenient way to build retirement savings.
Way #4: Look For Opportunities to Increase Your Income
Increasing your income is easier said than done, however it is not impossible. If you’ve been at your job for a while and taken on added responsibilities, it may be a great time to speak to your boss about a pay increase. Or, searching for opportunities elsewhere could result in a bump in salary.
If you have a hobby you’re passionate about, look for opportunities to make some money with it. Put your art, shoes, or trading cards up for sale online, offer classes (cooking, dancing, gardening, etc.) through your local rec center or find odd jobs you can do on the weekend.
If you do find yourself able to increase your income, be sure to revisit your budget and determine how that additional money should be used. If it’s being spent frivolously, it’s not helping you work toward greater independence.
Way #5: Begin Building Your Portfolio
Once you have control over your debt, you’ll want to focus on building passive income - which can be done through investments. Start off simple by contributing to a retirement account, like a 401(k) or IRA. You don’t need to contribute a lot to these accounts right away as even small contributions now can grow significantly toward retirement due to the power of compound interest.
If you’re looking to expand, consider utilizing a robo-advisor or working with an investment advisor. A robo-advisor allows investors to take a DIY approach to managing their portfolio, while an investment advisor can provide tailored, complex investment strategies.
As you involve yourself in investments further, you may find other opportunities to invest as well, such as real estate, collectibles or other alternative investment classes.
Achieving financial independence takes time and patients as it is not something that will happen overnight. If you plan and save, however, it really can pay off for you in the long run. Not only does it help you to build savings, but it starts strong habits for the future. If you're unsure where to start, feel free to reach out to one of our trusted financial professional who can help address your concerns and develop tailored strategies going forward.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.