Financial Independence: 5 Steps to Take in Your Financial Life and Pursuit of Happiness
People at all stages of their life and career should think about steps they can take to achieve their goals for financial independence. Regardless of where you’re at age or career-wise, here are 5 steps you can take to help you on the road to financial independence.
STEP 1: Prioritize your financial goals
Our lives are complicated, and our finances even more so. That’s why it’s important to be aware of your main concerns about your financial situation. Make a list of them, and then rank them in order of importance. For example, you might ask yourself:
Will I have enough to retire?
If I die, will my family be okay, or should I review my life insurance?
Is my emergency fund big enough?
While creating this list, keep in mind what you want to accomplish. For example, “I want to retire at age 65.”
STEP 2: Create and use a budget
People tend to worry that by budgeting that they’re giving up control, but it’s actually the opposite. Budgeting is about taking control of the money you spend so that your spending habits don’t control you. Use an online budgeting tool, like YNAB (short for “You Need a Budget”) to make your life easier. Tools like this automatically import your bank transactions, making keeping track easier. If you need help getting started, a budget coach can help you out.
STEP 3: Take inventory of your current financial status
You can’t create a roadmap to your destination without knowing where you’re starting out. Some things to think about include:
How much income are you making from your job, business, or side hustles?
How much debt do you have, and what kind of debt is it? What are the interest rates on your debts?
What’s the value of your savings, retirement accounts, and other assets?
What benefits do you have through your current job? Are you taking full advantage of what’s available to you, including the company retirement plan match (if offered)?
STEP 4: Build your roadmap to financial independence
A financial roadmap isn’t as simple as starting a point A and arriving at point B. The nature of life is that it throws us curveballs, so it’s important to plan for best, worst, and manageable-case scenarios. For example, you may think to yourself, “I have “x” dollars, I am saving “x” dollars per month, so I should* have “x” dollars by the time I'm 65.” Of course, we know that there are all kinds of factors that could impact the amount you’re able to save, and the rate of return you can expect to get. When we work with clients on long-term financial planning, we look at what is called the Confidence Zone - anywhere from 70-90% chance of success, based upon historical market performances. We also like to stress test plans, because let’s face it - there are some things that can negatively impact plans, such as bad inflation, and a bad sequence of returns. That’s a great reason to work with a CERTIFIED FINANCIAL PLANNER™ to help guide your decision-making.
STEP 5: Work with a CERTIFIED FINANCIAL PLANNER™
Financial planning can be overwhelming. With so many opinions on the “right” way to save, invest, and plan, it can be difficult to know where to begin. How can working with a financial advisor help you? Here are a few things we do for our clients.
We create a detailed goals analysis used to determine and balance financial goals with roadmap to financial independence;
We simplify investment and retirement planning and management to help consolidate and manage assets to meet your established goals with proper risk mitigation, giving your investments the best shot at growth; and
We provide access to a secure, digital platform that provides a real-time snapshot of your financial situation in which you can create and adjust goals, see how you’re progressing in debt payoff, and get a great overall view of your progress.
Ready to get on the road to financial independence? Schedule your free consultation today to work toward your financial goals and make your financial life easier.
