When you set goals for yourself, you have incentive and motivation to make them happen. These goals are especially important in your financial life. When you create financial goals, you can use them as the benchmark for your decisions when it comes to saving, investing, and more.
One long-term financial goal that I hear my clients talk about is reaching financial independence. Financial independence is a goal that means different things to different people. For some, it means accumulating enough wealth to cover their expenses for the rest of their life, freeing them from having to work. For others, it is having enough money to pursue a passion project that may or may not bring in steady income. In essence, financial independence is the freedom to pursue your passions, knowing your savings and investments will cover all of your expenses.
Financial independence is a wonderful goal, but it takes a lot of discipline to achieve it. Let’s look at three different ways you can start prioritizing financial independence in your own life.
1. Pare Down Debt
Debt is one of the top roadblocks standing in your way of financial independence. Debt is a huge burden on your financial (and personal) life, which is why it’s so important to establish a plan to eliminate it as quickly as possible.
It can be overwhelming to think about the amount of debt you have. I encourage you to take a deep breath and divide your plan into small, digestible segments to keep from overwhelming you.
The first step is to understand the type of debt you’re carrying. This could be a mortgage, student loans, credit card, or other personal loans. Then, determine how much is owed in each category. This will help you visualize your debt and give you a realistic picture of where you are at.
Once you have a handle on the type of debt you have and how much you owe, you can begin to create a rigorous repayment plan to help get rid of your debt quicker. Consider starting with your highest interest rate first, that way you get your most expensive loan out of the way. Remember, consistency is key when it comes to pairing down your debt. Once you create a repayment plan, stick with it. You will be pleasantly surprised by your efficiency in paying off your loans.
2. Monitor Your Expenses
On your path to financial independence, it is important that you be acutely aware of your expenses. This point asks you to be mindful of lifestyle inflation and keep a tight grip on your regular spending.
This is where your budget will come into play. Creating a budget with the intention of reaching financial independence will help you structure your lifestyle to reflect that end goal. I always advise budgeting with your goals and values in mind because it will increase your desire to stick with it, even when it may be difficult.
It’s important to live comfortably within your means while keeping your expenses low and manageable. This doesn’t mean that you have to skrimp on everything, it just means that you structure your lifestyle around your goal for financial independence. It may take some trial and error to find the right balance between your budget and your lifestyle and that it ok. Be flexible and do what works best for you and your family.
3. Continue To Grow Your Savings
Financial independence is all about your savings and investment regimen. It relies on your ability to strategically grow and manage your wealth over time. In light of this, you’ll need to develop and maintain a savings strategy that works for you. Your financial advisor will be able to work with you to create a savings plan that helps grow your wealth and reach your goals.
As you continue on your journey to financial independence, I want to encourage you to keep prioritizing your savings. When you make this a priority, you will continue to head in the right direction.
Financial independence is a wonderful goal, one that will certainly change the way you look at and experience the world. When you take care of your debt, have a healthy budget, and maintain a savings schedule, you will be able to get on the right track to reach your goals.
Do you want to learn how you can get on the path to financial independence? Give us a call, we would love to help you!