How to Become Financially Independent

Setting Goals

I don’t know about you, but I always need to work towards something. Having goals keeps me focused, motivated, and a more productive person. Below are the top 10 money goals that lead to one ultimate outcome – how to become financially independent. Some of these may seem insurmountable but if you stay focused, you will get there.

Build a $1,000 Emergency Fund

What happens if you get laid off? How about if you get sick or injured and cannot work? What happens if your roof leaks, have mold growing in your home that needs to be removed?

There are countless unforeseeable events which, when unprepared, put you into debt and wreak havoc on your financial well-being. It is a guarantee that you will face some sort of unforeseeable event and therefore, it is a guarantee that you will need an emergency fund.

If you don’t already have one, its important to start building one. Becoming financially independent starts here, with a small achievable emergency fund of $1,000. This will allow you to cover smaller emergencies.

Build a 6-Month Emergency Fund

You have your $1,000 emergency fund, but is it enough? $1,000 is an AMAZING accomplishment. Want to kick-it-up a notch?

If you no longer live with your parents, own your own home, or have children $1,000 is going to go out the door quick when an emergency hits. Ideally, you will have a 6-month emergency fund.

What does this look like? Strip all of your “extras” out. What is your bare bones basic cost of living? I mean food, shelter, utilities. Whatever that number is, multiply it by 6 and that is what you want to have.

“Extras” can be easily cancelled in the short-term. You may not like giving these things up but just remember it’s temporary.

Max out your IRA

Whether you have a Traditional or a Roth, make sure you max out these tax advantaged accounts each year.

Compound interest is a magical thing. You definitely don’t want to miss out because you wanted to buy a chai latte and the latest Lululemon leggings instead.

Financial well being feels so much better than immediate gratification and it lasts a lot longer too. This is crucial to becoming financially independent.

Max out your 401(k)

Whether you have an employer or you are self-employed it is mission critical that you contribute as much as you can to your retirement accounts.

They are tax advantaged and compound interest is an amazing thing. It is absolutely riveting to watch your investments grow. Don’t miss out on the journey.

Pay Off Debt

The shackles of life. Paying off debt will do wonders for your mental health and your wallet.

Can you imagine never having to pay high interest student loan debt, no car payments, no high interest credit card debt. Going a step further, what if you could get rid of your mortgage? How would you feel if you were free from all these shackles? FREEDOM!! That is how.

This is why I have paying off debt as a top 10 money goal. Either stay out of debt or get out of debt and you can take control of your life. Interested in learning how to pay off debt? Read more here.

Start a Side-Hustle

Having difficulty saving? Want to earn more money and save more money?

In the age of the internet, it has never been easier to start a successful side-hustle. The opportunities are endless.

Do you enjoy driving? Lyft or Uber may be for you.

Enjoy cooking? Why not teach some cooking classes through Airbnb experiences!

Have an extra bedroom? Short-term vacation rentals may be a great fit.

Literally, you can do anything. Sky is the limit. So just think about the resources available to you, watch some YouTube videos, and get things going!

This is a great way to increase your earnings and savings rate which will lead becoming financially independent even sooner.

Identify What Makes You Happy

This is probably the most important goal on this list. You only live once – how are you going to live your best life?

Do you enjoy traveling, playing video games, spending time with your family and friends, riding your bike, going to the beach?

Identify 10 things that make you the happiest.

I am guessing very little if anything on that list requires spending lots of money (that is what happened to me).

Being financially secure will allow you to enjoy what makes you the happiest even more.

Invest in Taxable Accounts

Once you max out your IRA, 401(k), and any other tax advantaged account, and pay off debt, and have an emergency fund, make sure you set aside money each month to invest in taxable accounts.

I said it before and I’ll say it again… COMPOUND INTEREST!

Build Your Credit

Do you think that just because you are no longer in school that you don’t have a report card? Think again my friend.

Your credit score is your report card for life. If you are financially responsible you will have a very good report card and if you are not financially responsible you will have a bad report card.

Those with the best credit scores will be eligible for loans with the lowest interest rates. You will be eligible for credit cards with more rewards points and higher credit limits.

Higher credit limits mean your credit utilization will be lower and your credit score will improve even more.

Yea, I know I just said pay off debt because it’s the shackles of life. However, if you are responsible, then you can take advantage of LEVERAGE. There is a difference between debt and leverage. You can build your net worth using leverage.

Basically, the system works by giving money to those who don’t need it and by refusing to give money to those who do need it. Be the one who doesn’t need the money.

Live on a Budget

The wealthiest are those that live below their means. They are not flashy, do not flaunt material possessions. If you saw these individuals walking down the street you wouldn’t think much of them.

Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are. – James W. Frick

I mean, look at Warren Buffett, he has lived in the same house in Nebraska for decades but the man is a billionaire. Spend less than you earn, live below your means, save a ton, be Warren Buffet.

Takeaways

• Take control of your life by taking control of your finances. Set goals and make a plan for how you are going to achieve them. Write these goals down! People who take the time to write their goals down have a much higher chance of achieving them.
• It is not enough to write down, “live on a budget”. To set goals that you actually accomplish, you need to be very clear on what you want, why you want it, and how you are going to get there. If you need help with making these types of goals check out my article on How to Make Goals You Can Actually Accomplish. I outline step-by-step and with examples how you can set your goals.
• If you think you may benefit from one-on-one guidance and working with someone to help keep you accountable, consider working with a money coach.
• Have questions? Let me know! I am happy to answer.
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