Are you ready to become financially independent? I’m not talking about quitting your job and retiring early, although that’s the dream for many in the F.I.R.E. community. What I’m talking about is the freedom that comes with taking responsibility for your financial future, getting enough financial education so that you can confidently and independently make your own financial decisions, and knowing that you are progressing toward your goals.
How to Become Financially Independent
That might seem like a large pill to swallow, but there are a few things you can do today that will help set you on the track to becoming financially independent.
Determine Your Vision for Financial Independence
The idea of financial independence means different things to different people. Overall, though, the idea is that you have enough income to take care of your expenses without having to rely on someone else. Each person I talk to has at least a slightly different view of what financial independence would look like for them. So, take the time to put together a plan (and a goal) as to what your financial independence will look like.
- Do you want to be free from student loans, your mortgage, or car payment?
- Is there a certain amount you’d like to have in savings, your retirement funds, or investments?
- Are you hoping to quit your current job, or take on another one?
- Do you want to be able to travel freely, without worry as to where the finances will come from?
- Is your dream to purchase a home, pay for college for your kids, or fund your grandkids activities?
There’s no wrong answer to these questions. The key is to determine what matters to you, and then put a plan in place to make it happen.
Evaluate Your Financial Knowledge
Of course, when you do figure out what financial independence looks like to you, it’s important to evaluate your financial knowledge. If your plan is to get out of debt, do you have what it takes to do so? Do you know what the process will involve, how to contact lenders for grace if necessary, or even how to put together a budget that will get you to that point? If your intention is to invest your money for the future, do you have the knowledge to be able to do so?
By taking the time to answer these questions and determine what gaps you might have in your financial knowledge, you’ll be able to pinpoint areas in which you need additional assistance.
Pursue Financial Education
Once you’ve determined your financial knowledge weaknesses, then it’s time to seek out some financial education in those problem areas. Common focus points for you may include:
While online articles and apps may be helpful for educating yourself in some of these situations, checking in with a financial advisor for a more detailed and specific-to-you assessment is always a great idea.
Assess Your Financial Situation
After doing your research or talking with your financial advisor, take another look at your financial situation and determine if what you’ve learned aligns with what you’re doing.
For example, if your goal is to retire with a certain amount of money in the bank, verify that the money you are saving each and every month is actually going to get you to that end goal. Likewise, if you want to purchase real estate during a specific time period, you’ll need to determine whether you are putting aside enough to be able to do so.
I recommend looking at each of the goals you’ve set personally or with your family. Is the goal feasible during the time period you’ve set and with the financial resources you have? If not, it might be time to consider making some changes.
Make Changes as Necessary
One of the hardest things for many comes when it’s time to embrace change. If you are unable to meet your financial goals, it’s likely time to do just that. You may need to increase the amount you are putting into your savings account, retirement, or toward debt payoff. On the flip side, you may need to change the goal entirely due to changes in employment, family situation, or increased expenses elsewhere.
Take the time to make the changes yourself or talk with a professional about how to do so in a way that benefits your family. It might seem easier to stay in that financial rut, but by addressing the problem now, it’s less likely you’ll find yourself stressed out about the small financial details keeping you from your goals.
Review Your Progress
I recommend that you take the time to review your goals and your progress at least once per year, if not more frequently. Consider the following:
- What financial goals am I pursuing?
- Am I meeting my goal, or at least making suitable progress toward it?
- What do I need to change in order to see greater progress? (i.e. increase income, savings, re-allocate investments, etc.)
- Is there anything I can let go of in order to meet my goal more quickly?
Of course, while it might be easy to get discouraged and want to make big changes due to lack of progress, it’s important to remember that many goals take a lot of time to reach, so don’t expect that marathon to happen in the timeframe of a sprint.
You Can Become Financially Independent
No matter what your finances look like at this very moment, you can become financially independent. Sure, it’ll likely take some hard work, but all good things do, so don’t get discouraged.
If you are looking for help from a financial advisor, we’d love to talk to you. Contact us for a financial consultation and get your finances on the right track today.