How Can You Become Financially Independent?

Financial independence. Just saying those two words can help you breathe a little easier.

For many, financial freedom means the ability to live comfortably without significant debt. To others, it may mean having some savings or being on track for a comfortable retirement.

Whatever it means to you, financial independence is the result of healthy financial habits and following a long-term plan. And with some hard work and resolve, it can be within reach.

How to become financially independent

From maintaining a healthy attitude to pursuing ongoing financial education, these eight tips can get you started down the road toward financial freedom.

1. Make a commitment
   Becoming financially independent is an ambitious undertaking that requires drive and focus. Once you decide you’re going pursue it, adopting the right mindset is essential. You’ll need to work hard to become financially free, but with willpower and positivity, you’ll get there — and triumph over any obstacles along your way.

2. Set goals
   Setting goals is an important part of your journey toward financial independence. For example, if one of your goals is to ramp up your savings (more on that soon!), you may want to set a target amount to save each month. This amount could then be used to increase your retirement contributions, pay down debt or keep on hand for emergencies so you can avoid using credit cards. Whatever goals you set, stay focused and you’ll get there.

3. Budget carefully
   A household budget is a core principle of financial wellness in general, but it’s especially important if you want to become financially independent. If you don’t already have one, take time to create a budget. A big part of that is tracking your expenses, which can help you cut back on spending and direct extra money to savings.

   Need help budgeting? Our easy-to-use budget calculator can crunch numbers so you don’t have to.

4. Learn about saving strategies
   Whether you’re 26 or 66, saving is an integral part of becoming financially free. This may seem challenging, but small changes — like cancelling subscriptions or planning home-cooked meals — can help reduce expenses. You can also try things like setting up automatic payroll deductions or any of these simple ways to save. If you don’t know where to start, our savings guidebook can help.

5. Reduce debt
   Debt from credit cards, and even owing money to friends and family, can hold you back from reaching financial independence. How you chip away at debt is up to you. If credit card debt is an issue, you can choose to tackle it with the avalanche or snowball method. Personal loans can be paid off faster as well. Whatever the source of your debt, remember that paying it down is only half the equation — you need to avoid adding new debt as well.

6. Monitor your progress
   As you work toward your goals, you’ll need to keep a close eye on your progress so you can stay on track and modify your strategy as needed. Part of this is monitoring your credit — both your credit report and your credit score. If you have retirement funds, such as a 401(k) or individual retirement account (IRA), check them regularly to see if your investments should be adjusted.

7. Plan for your future
   Whether retirement is 5, 10 or 20 years down the road, a comfortable retirement is a well-planned retirement. And if you’re hoping for true financial freedom, you’ll need to plan carefully. Check in with your employer about contributions to a retirement account, as many employers will match your contribution up to a certain percentage. Take time to research money-saving and investment apps as well. Popular apps like Acorns automatically invest change from purchases into a diversified stock portfolio or IRA.

8. Stay educated
   No matter how much you know about financial wellness, there’s always room to know more. And the more you know, the better equipped you’ll be to reach your goal of financial independence. Ongoing financial education will be essential for your success.

What qualifies as financially independent?

Being financially independent can mean different things to different people. For some, it’s freedom from debt. For others, it’s having enough money saved for emergencies or early retirement. Whatever your definition is, the good money habits listed above can help make financial independence a reality.

How can I be financially independent in 5 years?

No matter how you define financial freedom, coming up with a long-term plan is key. To do that, you’ll need to identify your goals and start working toward them. Do you need to pay down debt? Maybe you need to create and implement a household budget. Whatever’s on your list, fully commit to it. A five-year deadline is challenging, but, with proper planning and fortitude, absolutely attainable.

A little sacrifice goes a long way

While reaching financial independence may seem daunting, breaking it down into manageable chunks will help. So will the right attitude and some old-fashioned determination. Don’t forget to celebrate your wins along the way and remember that a little sacrifice now will go a long way toward your future.