Happy Independence Day! 5 Ways To Be Financial Independent This Year
Advising TrendingThe Fourth of July is an exciting holiday that marks the independence of our nation with the signing of the Declaration of Independence. As you celebrate with hot dogs, fireworks and pool parties this year, consider this: 2021 could be your year to start finding financial freedom of your own.
Achieving financial independence is a goal that almost everyone has. For most Americans, however, debt is a significant roadblock. In fact, the average adult has around $90,460 in debt.1 This includes all types of consumer debt such as credit cards, personal loans, student loans, mortgages and auto loans.
The good news is, here at GuideSpring Wealth Strategies there are strategies to pay down debt and work toward financial independence. How can you do this? Here are five actionable ways to start working towards more financial freedom this year.
Way #1: Make a Budget and Stick to It
If you want to be certain that your bills will be paid and savings goals are on track, then you need to set a monthly budget and do your best to stick to it. If you’re used to spending and saving as you please, sticking to a strict budget will feel hard at first. But over time, consistency in your spending habits will make following a budget easy and natural. Holding yourself accountable can help deter impulse buys, splurges and make your savings goals a bigger priority.
For many of our clients, our financial planning software is a useful tool in sticking to a yearly consumption budget. If you think you will be making any large changes to your yearly budget anytime soon, feel free to reach out to us so we can update your plan to reflect your current needs.
Way #2: Pay off Your Credit Cards in Full
Credit cards have high-interest rates that can grow your debt every month they aren’t paid off. If you’re able, pay off your credit card balance in full each month. Additionally, pay them on time to help you build good credit. If possible, it’s best to treat your credit card like a debit card, meaning you don’t spend more than you have. Once you have high-interest debt like this paid down, you can focus on low-interest debts like mortgages, auto loans and student debt.
Way #3: Opt for Automatic Savings
One of the most effective ways to save more money is to automate the process. Determine how much you’re able to contribute to your savings account each month and set up an automatic transfer with your bank. Soon, you’ll forget this is even happening.
If your company offers a retirement savings plan like a 401(k), you may have the option to automatically defer funds from your paycheck to the account. Again, this is something that will happen without action from you, making it an easy and convenient way to build retirement savings.
Way #4: Look For Opportunities to Increase Your Income
Increasing your income is easier said than done, but it’s not impossible. If you’ve been at your job for a while and taken on added responsibilities, now may be an opportune time to speak to your boss about a pay adjustment. Or, searching for opportunities elsewhere could result in a bump in salary.
If you have a hobby you’re passionate about, look for opportunities to make some money with it. Put your art up for sale online, offer classes (cooking, dancing, gardening, etc.) through your local rec center or find odd jobs you can do on the weekend.
If you do find yourself able to increase your income, be sure to revisit your budget and determine how that additional money should be used. If it’s being spent frivolously, it’s not helping you work toward greater independence.
Way #5: Begin Building Your Portfolio
Once you have control over your debt, you’ll want to focus on building passive income - which can be done through investments. Start off simple by contributing to a retirement account, like a 401(k), IRA, or Roth IRA. Even small contributions now can grow significantly toward retirement through the power of compound interest.
Achieving financial independence isn’t something that happens overnight. If you plan and save, however, it really can pay off for you in the long run. Not only does it help you to build savings, but it starts strong habits for the future. If you're unsure where to start, an experienced financial professional can help address your concerns and develop tailored strategies going forward.
As you involve yourself in investments further, you may find other opportunities to invest as well, such as real estate, collectibles or other alternative investment classes. All of these asset classes are within GuideSpring’s expertise. If you would like to discuss the option to invest or learn more about these alternative assets please give us a call at (970)-818-5243 or schedule an appointment.
- https://www.cnbc.com/select/average-american-debt-by-age/