Financial independence, two words that every responsible adult wants to hear, but what is financial independence? It is the financial goal you achieve when you have zero debt, savings for emergencies and retirement, and aren’t living paycheck to paycheck. It can also include some great major purchases like a house, car, or boat. To be financially independent should be everyone’s goal, with no exceptions.
Most people give up on the dream of financial independence, thinking it is difficult to achieve. Still, the truth is there are steps you take that are immediately actionable and can greatly impact your financial status. Here are three easy steps that will get you to financial freedom that you can apply today!
Get Control of Your Money
Often, a person cannot get out of debt or have financial independence due to the loss of control over their money. This loss of control can happen when debt is taken on that is hard to overcome. These debts include high interest or payday loans, maxed out credit cards, or other loans or credit lines that have you in a hole you can’t climb out of even with making payments.
Suppose you can’t afford a financial planner or credit fixer, which is often the case when deep in debt. You can take control without professional help. First, work at consolidating your debt if you can. Find the lowest interest loan or obtain a low-interest loan if possible to cover all your debt and use it to pay off all your cards and higher-interest loans. This action will consolidate all your debt into one payment with a lower interest rate. If you cannot obtain a loan or don’t have room on a lower interest credit card to charge off higher interest debts, start by paying off two things right away. First, any high-interest loans or credit cards, and second the smallest debt you have. Doing these two things will help you gain control of your finances quickly.
Once you gain control, it is vital that you get rid of credit cards and don’t take on any new loans. Once you get control and get out of debt, don’t allow yourself to get there again.
Cut Spending
Besides getting out of debt, trimming the fat in your spending is an immediately actionable way to get to financial independence. First, you have to look at your finances and truly analyze it. You don’t have to do away with every luxury you spend on. Luxuries are anything outside of necessities. Luxuries can include everything from big-ticket items like a new TV to something small like impulse buys when you go grocery shopping. Cutting spending or trimming fat can be much like a diet. If you are not keeping track of what you are eating, how much you’re eating, or the quality of the food you’re eating, you will not be successful with your diet. In a budget, you need to write down everything you spend your money on and prioritize it.
If you are single and have no other people on your budget, it can be fairly easy to determine spending. However, if you are working on a family budget, you will need to ensure all the family members account for their spending and participate in the decision on what to cut. This participation and buy-in is essential to help everyone participate in cutting spending.
Increase Your Income
In today’s gig economy, it is much easier to get a side hustle going. In the past, the only side gigs were selling make-up or housewares in a pyramid marketing venture. Today, there are hundreds of ways to earn extra income on the side with little to no upfront costs to you. You can make food, grocery, or package deliveries as a contractor, which gives you a great deal of flexibility in schedule and income. You can also do various freelance jobs on the side using your skills and talents to gain you more income.
Another way to increase your income is to obtain a second job. Often you can get jobs that are seasonal if you only need the second income for a limited time to pay down debt or build savings. Unlike the gig or freelance type job, this would be a regular job schedule and income. You can also ask for a raise or go for a promotion. These extra boosts in your income can help you work through debt more quickly or build a great savings that can be used for emergencies, large purchases or down payments, or retirement.
Conclusion
Financial independence should be a goal for every financially responsible adult. Many think it is hard to achieve, and either don’t try or give up if they do try. There are many ways to gain financial independence, but these three easy steps are quick ways you can get on the road to financial independence today!
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