The Fourth of July is a favorite holiday for many Minnesotans eager to enjoy a day on the lake or at the cabin with friends and family. With plenty of food and fireworks, we’ll celebrate America’s independence, but don't let the fanfare fade before considering your own financial freedom.
What is financial independence?
Being financially independent looks different for each person based on their unique lifestyle and financial goals. In general, it means having enough money to support your desired lifestyle without needing to rely on traditional employment or the financial support of someone else. Your specific goals leading to financial freedom will likely change depending on the stage of life you’re in.
For example, someone who is just starting out in their career might focus on having enough money to cover their basic living expenses, while also paying off any outstanding debt and saving for the future. On the other end of the spectrum, someone nearing retirement may focus on building income streams to replace their paycheck when they stop working. For many people, being able to retire comfortably is the ultimate form of financial independence!
Why does it matter?
Pursuing financial freedom is a lofty goal, but an important one. When you are financially independent, you have the freedom and flexibility to decide how you want to live your life. You can choose to work or not, pursue your passions or even travel the world, all without having to worry about money. This also provides a sense of security by ensuring you have enough money to cover your basic living expenses and any unexpected costs, like medical bills or home repairs.
If you hope to retire someday, financial independence is critical. Without it, you may not have enough money to support yourself in retirement and be forced to rely on help from others, depend on government support or stay employed for longer than you want. Plus, many retirees hope to build generational wealth to ensure their loved ones are taken care of for years to come. Becoming financially free helps you leave a legacy by accumulating enough wealth to support your retirement, and then some!
How do I find financial freedom?
The security, freedom and confidence that comes along with financial freedom sounds great, but it can feel out of reach at times. Financial independence doesn’t just happen; it’s created through proactive planning! Whether retirement is years away or just around the corner, there are several key steps you can take to help you become financially free.
Start saving early. To enjoy true financial independence, it’s important to create a nest egg for the future. Start saving for retirement now, no matter how little you can spare, to ensure your money has time to grow with the power of compound interest. Consider contributing to a company-sponsored 401(k) or opening an IRA.
Live below your means. Overspending can make it hard to save for the future, so use a budget to help identify where you can cut back. This will create more wiggle room to prioritize your future financial freedom.
Pay off debt. If you live beyond your means, you may end up carrying high levels of debt, which can make it difficult to pursue your future financial goals, especially financial independence. Consider paying off any high-interest debt as soon as possible to make sure more of your hard-earned money stays with you rather than paying for the past.
Invest wisely. Instead of depending on a paycheck from a full-time job, a financially independent person covers their expenses with savings, investments and passive income streams. Consider working with a financial advisor who can develop an investment strategy that aligns with your unique goals and risk tolerance.
Plan for healthcare costs. Retirees can expect to pay more than $300,000 in healthcare, which can quickly diminish your savings if you don’t factor it into your overall financial plan. Consider purchasing long-term care insurance or contributing to a health savings account (HSA) to help cover your future medical needs.
Consider working longer. If retirement is fast approaching and you feel like you don’t have enough income sources to cover your future expenses, consider delaying retirement to help build up your savings. This will also help you feel more secure by reducing the number of retirement years your nest egg will need to cover.
Have a plan. Without a financial roadmap to guide you, several roadblocks could prevent you from finding financial freedom—be it overspending, debt or unexpected expenses. Creating a proactive plan will help you tackle these challenges by providing the financial education you need and equipping you with strategies designed to withstand uncertainty. If you want to learn more about our personalized roadmaps, schedule a meeting with our team.
Becoming financially independent is not an overnight process, but rather a long-term goal that requires careful planning, discipline and persistence. By taking these steps, you can increase your chances of retiring comfortably and finding true financial freedom.
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