Money / Financial Planning
PeopleImages / Getty Images/iStockphoto
If you’ve dreamt of becoming financially independent, where you have more income than you do expenses, why waste any more time? Make 2023 the year you begin on that path.
Explore: GOBankingRates’ Best Credit Cards for 2023
Learn: 5 Things You Must Do When Your Savings Reach $50,000
Financial independence, in a nutshell, “means that you have enough money saved and enough passive income to supply all of your needs; so, you don’t need a paycheck to pay for your expenses,” said Stefan Ateljevic, CEO and founder of TrinityRank. Keep reading to learn just how you can get started establishing financial independence in the new year.
Becoming financially independent means becoming financially literate, which can be a learning curve for anybody who has never done more than put money into a savings or an employer-sponsored retirement plan. Adam Garcia, owner of The Stock Dork, said, “Make sure you can manage your own personal finance, create a monthly budget that matches your need, understand the expenses, how to create reasonable and timely financial short- and long-term goals, how much to save, and how to avoid bad financial habits such as overspending and over-shopping.”
Have a Plan
Wealth building requires planning. “You need to calculate how much you spend, how much you earn, how much you can save, and how much you can invest,” Ateljevic said. “Having a clear and defined budget will help you get a number of how much money you need to fulfill your needs without needing to work.”
Take Our Poll: How Long Do You Think It Will Take You To Pay Off Your Credit Card Debt?
Make a Budget
Jay Zigmont, PhD, CFP®, and founder of Childfree Wealth, urges people to determine their goal, whether that is the goal of early retirement or to have more options, and then get on a budget. “You need to have a plan for all of your money. You may have to make sacrifices now to get to your goal in the future. Work on a budget that reflects what you must, should, could and won’t spend money on.”
Keep Realistic Expectations
Unless you win the lottery or have great luck in the stock market, you’re unlikely to reach financial independence quickly. “Unless you’re a millionaire, it’s almost impossible to reach financial independence at 20. You can reach it by 42 though, that’s a realistic age,” Ateljevic said.
Instead, “focus on setting a more attainable goal, like reducing (or eliminating) your debt, setting up an emergency fund with several months worth of expenses, or maxing out a retirement account,” said Sam Zelinka, founder of a personal finance website for federal employees.
Diversify Your …….