5 Simple Steps to Greater Financial Independence

Most of us strive for financial freedom but today’s economy seems to be working against us, making the process more of a struggle than it ought to be in many cases. While it can be a challenge to make ends meet, however, there are steps you can take to move closer to financial independence.

1. Budget

Making and sticking to a budget is the easiest way to see where your money is going, and to make sure you’re able to cover your expenses. The most common type of budget is a monthly one, but you can also take a weekly approach (especially if you get a weekly paycheck).

There are many ways to create a budget, as it shows in our article ‘Sticking to a Budget with No Budget’. Some people use the envelope method; others think that a spreadsheet is the way to go; and others still stick to pen and paper. Regardless of the method you choose, include your must-dos (bills and other payments), and do your best to set aside some money for savings. Easier said than done, we know, but that money can come in handy for those unexpected situations. And having everything laid out will benefit you in all kinds of ways.

2. Get Rid of Debt

Research shows that the average debt in American is roughly $52,940. And lest anyone get the idea that this is a function of U.S.-specific economic woes, we should note that in Canada, that average is more than $73,000. Of course, the numbers vary greatly across age groups and according to circumstances. But it’s clear that one of the most common obstacles to financial independence is debt.

Now, getting out of all that debt is another one of those “easier said than done” problems. But it still needs to be said: Minimize your debt as best you can, and pay it off as efficiently as possible. Pick a strategy to stick to. For some, that means attacking the debts with the highest interest first; for others it means eliminating the smallest debts, so that more money can be put toward the rest.

3. Stay on Top of Your Taxes

By calculating what you owe in taxes early on, you can design a more informed budget with accurate expectations as to what your true income is, what you may owe, and what deductions you may be eligible for. Rather than just making an estimate though, try to take the time to really calculate your likely taxes based on your financial circumstances –– as well as where you live.

For Americans looking to get an early jump on taxes, the federal situation tends to be more or less the same everywhere. However, state tax rates in the United States (as well as other factors like exemptions, write-offs, etc.) can vary from one place to the next.

In Canada, meanwhile, online tools have made it quite simple for people to calculate taxes based on whereabouts and individual situations. In addition to lots of readily available info on the most heavily populated provinces, there are income tax calculators for people living in Manitoba, as well as some even smaller regions like Saskatchewan, Nova Scotia, New Brunswick, and more.

Wherever you live, make sure you have an accurate understanding of the tax situation and a reasonable way of estimating or calculating your own taxes early on. It will, again, give you a much more in-depth understanding of your near-future financial outlook.

4. Keep Yourself Healthy

It’s no secret that healthcare can get very expensive. The problem is worst in the U.S., where medical debt is often even more of a concern to people who are ill than actually getting better. But even in Canada, where the common refrain is that there is “free” healthcare, medial costs are greater than many assume.

One solution to this from a purely financial standpoint? Keep yourself healthy! Of course this is somewhat simplistic, and we make the recommendation with an understanding that none of us have full control over our health. Nevertheless, a healthy lifestyle can help you to avoid those would-be health issues that are avoidable –– and in turn keep you from unnecessary financial burdens.

Making a point of maintaining your health can certainly factor into your journey toward financial freedom.

5. Invest in Education

Last but not least, remember to invest in education if there are opportunities you’d like to pursue. Much of the talk that generally surrounds personal financial strategy has to do with maximizing the income you already have. But creating greater income streams should also be considered, and one of the best ways to do it is to pursue further education.

This doesn’t necessarily mean a college or graduate degree (which can be expensive in and of itself). In some cases, even a single relevant online course or a certification where a given skill is concerned can make you a far more attractive job candidate for a position that will see you take home more income. And that can make a significant, positive impact on your financial journey.

All things considered, financial independence is a lofty goal, particularly for younger adults. But it’s not an impossible one to reach.