Fireworks. Barbeques. Parades. Pool parties. That’s what comes to mind for most people when they think about the Fourth of July. The holiday is a great midpoint in the summer to enjoy a couple days off work and celebrate with friends and family.
Amid the festivities, it’s easy to forget what we’re celebrating. The Fourth marks the signing of the Declaration of Independence in 1776. The signing of that document declared that the 13 American colonies were free, independent states and were no longer subject to British rule.
This Fourth of July you can declare your own independence by taking control of your financial future. When you’re truly financially independent, you’re free to spend your time as you wish. You’re not controlled by debt or excessive bills or other financial burdens.
The good news is you don’t have to be ultra-wealthy to be financially independent. With a strategy and some discipline, anyone can achieve financial independence. Below are a few tips to help you establish your independence.
Live below your means.
The key to becoming financially independent is to spend far less than you earn. You need free cash flow to save and build a reserve. The most effective way to generate that free cash flow is to significantly reduce your spending.
Start by developing a budget. List out all categories of spending and use your past bills to estimate a monthly spending amount for each category. Then get creative and think of ways to reduce the amount of spending in each category. Could you reduce discretionary items like dining out, shopping, or travel? Could you eliminate cable or go to a budget cell phone plan? Every dollar you cut from your spending is another dollar that can fund your financial independence.
Become a prolific saver.
Cutting your spending is a great first step, but it doesn’t mean anything if you don’t contribute those dollars toward savings. Your savings fuel your future independent lifestyle, so it’s important that you save as much as possible as soon as possible.
There are a variety of savings vehicles you can use. Your strategy should be based on your unique needs and goals. However, you’ll likely want a mix of different types of savings. For example, your short-term savings may be liquid and relatively risk-free. Savings targeted for long-term needs may follow a different strategy. Your financial professional can help you develop a savings plan.
Debt can have a corrosive impact on any financial strategy. Every dollar you spend servicing debt is a dollar that can’t be used to fund your future financial independence. If you struggle with debt, now is the time to take action and eliminate your balances.
You can start by increasing your payments and reducing your balances. However, you also may want to take additional action. Contact your lenders and ask for a reduced interest rate. Or consider consolidating debt into a vehicle that has a lower interest rate. The less you pay in interest, the more you can allocate towards the debt balance, which can help you eliminate debt faster.
Create guaranteed* income streams.
Saving money and eliminating debt are important steps in becoming financially independent. However, the final step is to replace your income so you can leave the working world behind. As you accumulate savings, start considering ways to generate income in the future.
One way to do that is through the use of annuities. An annuity is a financial vehicle that can be used to generate an income stream that is guaranteed* as long as you live. In some cases, you convert a portion of your savings into lifelong income. In other types of annuities, your savings can continue to grow over time, and you can take an annual withdrawal that is guaranteed* for life. A financial professional can help you determine how an annuity could fit into your strategy.
Ready to declare your financial independence? Let’s talk about it. Contact us today at Protecting Your Retirement LLC. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. Our Telephone number is 913-648-2700.
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