Financial Independence this Fourth of July
The Fourth of July is an occasion to celebrate America's independence and, while there are many freedoms that we enjoy in this country, many Americans are struggling from a lack of financial independence and security. Imagine empowering these individuals to look towards Fourth of July as an opportunity to strive towards newfound financial independence. Continue to read and discover five steps to financial independence you can start today:
Be Prepared With an Emergency Fund: If 2020 taught us anything, it’s how quickly our financial circumstances can shift. A good practice for protecting yourself from a financial downfall is to have three to six months of your expenses readily available in an emergency savings fund, preferably in an NCUA insured account with your credit union. Having a good little nest egg that you can draw upon in case of a lost job or an unexpected emergency will give you a sense of freedom that comes from having financial peace of mind. Of course, saving money isn’t all that simple. Don’t overwhelm yourself with unrealistic goals. Start small. A great way to start is to automate your savings. This is identical to setting up an automatic bill payment, except that you are setting a monthly savings goal instead. With each paycheck, automatically transfer the designated amount from your checking account to your savings, sit back and watch your savings grow. Once you build up your emergency fund to a certain amount, you may discover that you enjoy the process of saving money even more than you enjoy spending it.
Embrace the Freedom of Life on a Budget: A common deterrent for building a budget is the assumption that budgets mean giving up financial freedom. This couldn’t be more wrong. Creating a budget is all about freedom. A skillfully created budget offers the reassuring sense of calm that comes from knowing where your money goes. By understanding how much you're spending and what you’re spending it on, you can take control of your finances. Living with a budget helps you achieve financial independence by setting clear goals, deciding how you want to allocate your money, and working toward your financial priorities with clarity and confidence.
Independence from Debt: Debt is often a necessary part of your financial life, but as a borrower, you need to understand the implications of having debt and borrow mindfully. Know the difference between good debt and bad debt. Do your best only to take out loans for things that are either a necessity or tend to increase in value, such as purchasing a home or an auto loan, rather than drowning yourself in high-interest credit card debt from everyday purchases. If you are currently already in debt, make a plan to get out, starting with paying off your high-interest credit card debt first. To be debt-free is one of the best kinds of financial independence that most Americans can aspire to have.
Invest for a Brighter Future: Another great way to achieve financial independence is to save and invest for a secure, comfortable retirement. Maximize your contributions to any tax-advantaged retirement savings accounts that you qualify for, such as a 401(k) plan or individual retirement account (IRA). If you’re an employee and your employer offers to match your plan contributions up to a certain percentage, make sure that you contribute enough to receive the full employer match. If you’re already maxing out your tax-advantaged retirement savings accounts, consider setting up a brokerage account or robo-advisor account to invest in a diversified portfolio of stocks, bonds, and mutual funds. Getting into the habit of saving a small amount of money today and investing it wisely can help you achieve financial independence for many years into the future.
Let Freedom Ring for Others: Maybe you’re already feeling financially free, your retirement savings are on track, and you have a solid emergency fund. If this is the case, consider using this July 4th holiday as an occasion to help provide independence for others. Be generous, invest in a loved one’s education fund, or perhaps consider donating to charity and give someone else the gift of financial freedom.
Financial independence doesn’t have to be out of reach. Getting out of debt, prioritizing your spending on what really matters, building an emergency cash savings fund, and investing for the future, you will build a stronger and more resilient foundation for your own life and for those you love. From our family at Unity Catholic to yours, Happy Independence Day!