No matter what age we are, everyone wants to be financially independent. This is as true for young people getting their first jobs to retirees looking to be independent from money worries.
However, that doesn't mean that everyone knows how to become financially independent.
While many people's journey towards this can be somewhat unique, there are a few key things that have helped the majority of people to put them on the right road with their finances.
Just because you're on the path to your own financial independence, it doesn't mean that you need to do so alone. Many people have used the likes of CPAs, tax attorneys, brokers, financial planners or a few other financial professionals to help them. While they may seem expensive, they can be quite affordable.
The vast majority will be able to help you with your finances so that you can become more independent. Having said that, there are a few key things that you can do without the help of a financial professional.
Visualize, Then Plan
Everyone has their own unique vision of what being financially independent means. However, in many cases this vision may be unrealistic; as such it may need a reality check.
While this is best done by a financial advisor or some other professional, or you could get advice from people you trust who are financially independent, such as parents.
This is because you may have different visions when you're in your 20s versus when you're in your 50s.
Because of this, it's worth getting advice from someone who knows the process and how to go about it. This will help you to better plan out what you need to do and how much you'll need to put into a savings account every year to become financially stable.
It will also give you a more realistic vision of what needs to be done and can help illustrate what the process is actually like.
Now that you know what's required and what your goals are, you'll need to start budgeting your finances, which is arguably the most crucial step. You'll need to keep track of your income and expenses and prioritizing certain expenses while reducing others.
This can be highly dependent on what your financial goals are, as well as your income. Depending on your goals, you'll need to put a certain amount of money away every month, so you'll need to budget with that in mind. While you may not need to tighten your belt too much, you'll more than likely need to cut down on a significant amount of expenses.
This doesn't have to mean being frugal, but it does mean knowing how much is coming in and going out every month.
Pay Off Any Debts
Paying off any existing debts is something that you'll need to factor into your budget, as you can't be genuinely financially independent when you still have to pay off debts. With that in mind, it's worth paying off these debts as early as possible; some people may pay them off as quickly as they can by drastically tightening their belt. While this will mean spending less money in the short term, it does mean that the debts will be paid quickly.
However, you could also go for a longer approach that has lower repayments. While this would mean that you'll be paying off the debt for longer, the repayments will be a lot more affordable and will be easier to budget.
Either way, once the debt is paid off, it means that you'll be able to free up a considerable amount of your income. With that, you'll be able to invest or put it into a savings account for the future.
As we mentioned above, everyone is going to have their journey toward financial independence. However, the fundamentals of getting this security are all the same, which is why it's always worth getting advice from a financial professional. As such, you'll be able to get financial advice that's specific to you and your finances.
Furthermore, if you're planning on investing to help build up a retirement fund, then professional help from a financial advisor or professional would be a significant advantage. With the above, however, you should be able to start building the foundation for your future financial independence.
While it may seem complicated, it can sometimes end up to be simpler than you originally thought.