5 Ways to Become Financially Independent and Stable
How to be financially independent and stable? It’s something most people dream of achieving, especially in this day and age where so many people are struggling with debt. But how do you go about creating the stability you crave in your life? There are certainly no easy answers to this question, but there are plenty of techniques you can use to get yourself off on the right foot from the very beginning, setting yourself up for future success and prosperity. Follow these five steps and you’ll be well on your way toward achieving financial independence and stability, however that might look for you.
1) Save money every month
To ensure you’re saving every month, set a goal for how much you want to save. Think about how long it would take for your savings account balance to be large enough for you not to have any financial worries. For example, say you want $100,000 saved up so that if something catastrophic happened like losing your job or having an illness in your family that left you with extensive medical bills, at least you wouldn’t lose everything.
2) Learn how to get out of debt
Getting out of debt should be one of your top priorities, as it can affect how you live your life for years. If you’re trying to become financially stable, paying off any credit card or loan debt is a good way to do so. Before you start, be sure to create a realistic repayment plan that fits with your income and will ensure long-term stability.
3) Automate your savings
Take advantage of your employer’s 401(k) or 403(b) plan. You can put aside money for retirement without paying taxes immediately—or at all, if you save in a Roth account. Even if you don’t have a retirement plan at work, open an IRA account that automatically deducts funds from your paycheck each month. If you can afford it, max out your tax-advantaged savings vehicles first before trying to grow your investments on your own.
4) Start investing today
I believe that one of, if not THE most important step in how to be financially stable is investing. It gives you financial freedom without worrying about finding a job (or 5 jobs). Investing also gives you peace of mind knowing that you have money saved for retirement or any other emergency. You should know your investment plan inside and out because it will ultimately determine your financial future.
5) Take advantage of compound interest
You’ve probably heard of compound interest, but it may not be top of mind. Think of it as a type of interest that starts earning interest on itself—and yes, it really is like magic! If you invest $10,000 over 20 years with 5% annual compounding interest, for example, you’ll end up with $36,727.89. Pretty cool! (For more specifics on how compound interest works, check out Investopedia’s full lesson here.)
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