Financial Independence

July Fourth is Independence Day, and it offers a good opportunity to discuss ways of reaching financial independence goals. There are many ways to reach financial independence, and it’s not just for the wealthy. Here are some good habits that can make financial independence a part of your future:

Rule No. 1

Pay yourself first. To reach financial independence, you will need to put yourself first. You need to prioritize saving ahead of everything else. Americans on average have a shockingly low amount in their savings accounts. More than half of Americans (57 percent) have less than $1,000 in their savings accounts. 

Save before you pay the utility bills, buy groceries, or even pay the rent. Paying yourself first encourages you to live on a smaller budget, and it’s a powerful saving habit. Funding an employer-sponsored 401(k) plan is a great way to get started. The contribution will be deducted right out of your paycheck, so you won’t even miss it. Living with what’s left after paying yourself is a great way to build wealth.

Debt

American consumers now carry a total of $747 billion in credit card debt (over $16,000 on average per household). [2] If you use credit cards to buy consumable goods and carry a balance, then you are enriching the banks and not yourself. The first step toward financial independence is to get rid of high interest debts, and free your money to work for you instead of the banks.

Spending

The real key to financial independence is to spend less than you earn. It takes a lot of diligence to spend much less than you earn though. First, you need to track your expenses and see what you spend money on. Then you can cut the things you don’t need, and keep lifestyle inflation to a minimum. Of course, it’s equally as important to generate more income. Remember to work both sides of the equation to widen the gap between spending and income.

Invest

It’s equally important to keep investing over the long term. That way you’re accumulating wealth over the long haul. A conservative, sensible middle-ground approach is the way to go in terms of long-term returns. Slow and steady wins the race, as they say.

                                                                                            

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Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC