July 4th is when we celebrate our independence, and this year we urge you to make financial independence a top priority.
We tend to focus on consumers who are in financial distress, helping them reduce debt and get out of the hole. But to be truly independent financially, we need to usher them further along, into the “financial success” side of the ledger.
To help make that happen, we offer 5 steps to financial independence:
- Do a self-assessment. Evaluate your situation. Do you have enough income to handle all of your expenses? Is there something left over for savings? Have you built up equity in a home or set aside money for retirement? Diagnosing your financial health is a key first step, but you don’t have to do it alone. A credit counselor can help you evaluate your situation with a free counseling session.
Take a free course in our online
FIT Academy to learn more.
- Pay off debt. Financial freedom means being free of debts. Create a budget that will pay down your debts systematically. Here, too, a credit counselor can help. You may need to reduce expenses or find additional sources of income, and it’s crucial to stop borrowing until the situation is under control.
- Save for emergencies. Create an emergency savings fund with enough to live on in case of job loss, medical emergency, or other unexpected situation. Have funds on hand for sudden auto repairs and other expenses that might otherwise get you deeper into debt. Also get insured in case of accidents; protect the income of your family’s primary provider.
Use a savings calculator or one of
our other Financial Calculators.
- Create concrete goals and write them down. Setting goals is much less effective if you don’t set them out in writing. Think about your plans for the future and spell them out. Balance short-term goals, like vacations, with longer-term goals like saving for college and homeownership.
- Create a plan to achieve those goals. Here you might seek the services of a Certified Financial Planner. Look toward a diverse investments portfolio that is appropriate to your situation. If retirement is drawing near, don’t take on anything that is highly risky. Set aside as much as possible in your retirement funds, especially if your employer matches your contributions.
See our “Basics of Financial Planning” workbook and
more in our Educational Guides and Downloads page.
Take these five steps as a broad outline of your journey to financial freedom, and be sure to visit us right here at credit.org for counseling and advice at any step along the way!