Seven Steps to Financial Independence
Financial independence is about not having to rely on other people (such as your parents) or lending institutions (such as banks, savings and loans or credit unions) for financial security. This is more achievable when you follow the seven steps outlined below.
Bring debt under control. Excessive debt can be a serious roadblock to financial independence. If you’re looking to pay off multiple debts that are each charging a different interest rate, you should start by increasing the monthly payments toward the debt with the highest rate. Once you’ve paid off that debt, start paying extra toward the debt with the next highest rate…and so on.
Live within your means. Spend less than you earn. Overspending is easy to do, especially with online shopping and credit cards luring you into impulse buying. Set up a household budget with the help of an online home budget calculator.
Pay yourself first. Put part of each paycheck into savings before you’ve had the chance to spend the money. You can contribute to your 401(k), 403 (b), or 457 workplace retirement plan through automatic payroll deductions. You can also sign up for automatic monthly transfers from your bank or credit union account to an IRA or other savings account.
Save for a rainy day. Start building an emergency fund if you don’t have enough money set aside to manage a financial emergency. If you ever have high medical bills, a job loss, or costly repairs to your home or car, an emergency fund can keep you from incurring more debt to stay financially afloat.
Take advantage of your employer- sponsored retirement savings plan. You can get major tax advantages by contributing to a 401(k) or similar workplace retirement plan. Your pre-tax contributions not only reduce your taxable income for the current year, but investment earnings on your plan account are tax – deferred until distribution.
Be properly insured. When the unexpected happens, insurance can be a financial lifeline. Make sure you have the right type of insurance to protect your earnings, your home (or at least its contents), your vehicles, and your health.
Get help from a professional. For one-on-one, personalized, and confidential guidance on achieving financial independence, contact a financial planner.
WAEPA’s Free Financial Wellness Program
WAEPA provides FREE financial wellness planning through our partnership with EY. As a WAEPA member, this program gives you access to important tools and financial advisors to help manage your day-to-day finances and build a retirement plan for your future. Log in through your member portal.
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