Skip to main content

How to Become Financially Independent

By: Kenyon Sutton, Financial Wellness Manager

Posted on 10/27/2021 11:15:36 AM

Happy young woman checks her bank account on her phone

Adulting gets a bad rap. While it’s true that transitioning to adulthood can be super exciting, it can also be an eye-opening and somewhat jarring process. The truth is a lot of young people struggle through their first few adult years because they weren’t properly prepared for the process. From managing your student loans to getting your first credit card, navigating adulthood can be stressful, confusing, and sometimes overwhelming.

Solid financial management is one of the main skills adults can learn to be successful. The best thing you can do is invest the time as early as possible to learn and grow in this process. Financial independence can mean different things to different people. But, in essence, it’s the state where you have enough savings, investments, and cash on hand to afford the lifestyle you want with less stress and little worry.

So, how do people become financially independent? This guide will help you get started down the path to financial freedom. It begins with a detailed plan and an unwavering commitment to that plan.

1. Set life goals

First, establish your goals and define what financial independence means to you. A general desire is too vague to be an achievable goal, so be specific. Assess your current financial status and set goals. Where are you now and where do you want to be? How long will it take you to get there? Decide what your ideal lifestyle looks like. What would you do with your time if money weren’t an issue? After visualizing this, start to think about what your expenses will be.

Next, establish financial milestones at regular intervals. Remember, the path to financial independence is considerably different at age 20 than it is at 40. The main things you will need to analyze are:

  • Income
  • Monthly expenses and projected expenses
  • Spending habits
  • Saving and investing abilities
  • Short & long-term goals

Be sure to keep your goals realistic. This way, you can set small achievable wins that will put you on the track to financial independence.

young man on a laptop thinking about his goals

2. Start with a strong foundation

You need a plan. While there is a lot of wisdom in the adage "spend less than you earn," you'll require a more comprehensive plan if you want to achieve financial independence by a certain age. This is because, becoming financially independent isn't a single goal but rather a series of sub-goals. Make a plan that sets out your path to financial independence. To do this, you’ll have to:

  • Consider your career and determine how you might increase your income
  • Make a budget or spending plan and understand your savings patterns
  • Set timelines with milestones
  • Remember to reward yourself along the way
  • Build smarter safety nets

While on this point, strive to know where you are financially. You must constantly review your plan and make adjustments when necessary. The road to financial independence is not always easy, and you will likely face some obstacles along the way.

3. Build a strategy and stick with it!

Once you’ve detailed your unique path to financial independence, it’s time to start making it a reality. Here are a few things you’ll need to do to help get you started.

  • Pay yourself first by automating your savings
  • Build an emergency fund
  • Make use of tax-advantaged accounts. Enroll in your employer’s retirement plan and match the contribution. If self-employed, set up a retirement account for yourself.
  • Create surplus funds to invest
  • Automate bill payments
  • Diversify your income
  • Research and lower monthly payments with better plans and discounts
  • Monitor your credit score

To become financially independent, you must develop healthy financial habits, which will require quite a bit of sacrifice on your part, but remember that it will all be worth it in the long run.

More Importantly, Understand That Income Is Not Wealth

The key to financial independence is not necessarily having a high-paying job. Yes, earning more helps amass assets, but building wealth requires patience and no small amount of self-control. Plus, true wealth is having the freedom to spend your time on the things that you enjoy most. Gaining control over your time is how you know you're on the right path to financial independence.

Remember that in the world of finances, consistency can yield excellent outcomes.

Don't miss another article

Stay up to date with the latest financial tips and news. Subscribe to our blog.