What does it mean to be financially independent?
The definition of financial independence varies, depending on who you ask. To some, being financially independent means having more money than you could ever spend; for others, it’s liberation from debt and a paycheck-to-paycheck lifestyle. Then there’s the FIRE movement, as in Financial Independence, Retire Early, a philosophy that encourages people to save large amounts of money early-on so they can retire in their 30’s and 40’s. While most of us won’t retire until our 60’s, a retirement free from debt and anxiety is something we should all aim to achieve.
How you can become financially independent
1. Spend less than you earn
While living within your means may seem like common sense, it’s something that many people struggle with. After all, a world without overspending would have no need for credit cards and payday loans. First, assess your current budget—how much are you spending each month and where is that money going? Are there any areas where you can cut back? Use this free budget worksheet to help you get started.
2. Pay yourself first
Consider yourself an expense; just like you pay your mortgage, electric and water bills, saving for retirement needs to be part of your budget. Set up an automatic transfer from your paycheck into your 401(k) or other retirement savings account. We recommend that 10-15% of every paycheck go into your savings, but if that’s out of reach, make sure you save enough to earn your employer match. You’ll also want to adjust your contributions once a year or with each raise.
3. Get on the same page
As any marriage counselor will tell you, poor communication is the #1 relationship killer. Lack of communication can be expensive, too, and not just because it might leave you holding the bill for divorce court. After all, it’s pretty difficult to stick to a budget if your partner isn’t in on the plan. Achieving financial independence needs to be a joint effort. It’s important to have open and honest conversations with your partner where you can both discuss your financial goals and future retirement. Couples should consider outside influences such as how much financial help you will offer adult children or an aging parent.
4. Make a plan
Regardless of when you plan to retire, a financial professional will help you create a retirement savings strategy that fits your individual needs. As you get closer to your retirement date, this plan should evolve to include everything from tax planning to Social Security. Here at Cowen Tax Advisory Group, we believe that holistic retirement planning is the best way to achieve a future that is both seamless and secure.
Tune in to WTNH News 8 at 9:15 AM on Friday, July 5th, as Roger Cowen discusses these and other ways to build your financial independence.
Sara McKinney
 saractag@gmail.com
As Cowen Tax Advisory Group’s Digital Content Marketing Specialist, Sara provides in-house copywriting and manages the company’s electronic records system, email marketing, and blog.
