5 Ways to Find Your Financial Independence This Year

Achieving financial independence is a goal that almost everyone has. It brings you the personal freedom to do what you want. For most people, however, debt is a significant roadblock. In fact, the average adult has $104,215 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 that there are strategies to pay down debt and work toward financial independence. How can you do this? Here are five actionable ways to work 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 your 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 initially feel hard. But over time, consistency with your spending habits will make following a budget easy and natural. Holding yourself accountable can help deter impulse buys and make your savings goals a bigger priority.

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 can, 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

Automating the process is one of the most effective ways to save money. Determine how much you can 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, you may have the option to defer funds from your paycheck to the account automatically. Again, this will happen without your action, 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 passionate hobby, 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 can 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 control your debt, you’ll want to focus on building passive income - which can be done through investments. Start simply by contributing to a retirement account. Even small contributions can now grow significantly toward retirement through the power of compound interest.

If you’re looking to expand, consider working with an investment advisor who can provide tailored, complex investment strategies.

As you become more involved in investments, you may find other opportunities to invest, such as real estate, collectibles, or other alternative investment classes.

Achieving financial independence isn’t something that happens overnight. If you plan and save, however, it can pay off for you in the long run. Not only does it help you build savings, but it also 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.