What is Financial Independence?
Do you want the freedom to live life without financial stress? The exact meaning of “financial independence” – and the approach – varies from person to person. For some, it means they want enough income and investments to pursue their desired lifestyle without relying on traditional employment.
For others, financial independence is about seeking freedom from financial stress or the freedom to pursue a passion project. Are these dreams realistic? Absolutely! With help from Ameris Bank and a few short-term sacrifices, you can achieve financial independence – no matter how you define it.
How to Achieve Financial Independence
Achieving financial independence is a long-term journey that ideally starts at a young age. If you’re in school or just starting a career, stay tuned.
If you’re further along in your life or career journey, navigate to our advice for mid-career adults
For Teens and Young Adults
Learn early and often. Start learning about personal finance as soon as possible. This can be done through self-education or by seeking guidance from parents, mentors or financial advisors.
Set goals. Do you need to save for college? Aspire to start a business? Do you dream of faraway locations you want to explore? Set tangible goals and track your progress to stay motivated throughout your journey.
Create a budget. Determine your monthly income, track expenses and allocate funds for various categories like food, transportation, clothing and entertainment. Here are some tips for getting started.
Start saving. Set aside a portion of your income or allowance each month for an emergency fund. Then, invest the rest in a savings account.
Avoid debt. Avoid excessive debt, especially high-interest credit card debt. If you plan to take out student loans to fund your education, learn how to manage financial aid disbursements and budget for a repayment plan.
For Mid-Career Adults
Pay off high-interest debt. Prioritize paying down debt with high interest rates. This will free up more money for saving and investing. A Home Equity Line of Credit can be used to consolidate debt.
Automate your savings. By enrolling in retirement plans and automating your savings, you will no longer have to remember to “feed” your account. Use our calculator tool to visualize what additional monthly savings will look like in 10-20 years.
Invest in yourself. Increase your earning potential by upgrading your professional skills. Even a side hustle can help diversify your income stream and improve your odds of achieving financial independence.
Avoid lifestyle inflation. Resist the temptation to increase your spending as your income grows. Instead, set aside the difference in a high-yield savings account or certificate of deposit.
Embrace frugality. Shift your money mindset and cut expenses. If you and your spouse both work, consider living off one income and putting the rest in savings.
For Soon-To-Be Retirees
Invest wisely. Explore investment options that align with your risk tolerance and long-term goals. Consider diversifying your investments to minimize risk.
Take advantage of catch-up contributions. As you approach retirement age, the IRS will allow you to make “catch-up” contributions. For 2023, the 401(k) catch-up contribution limit is $7,500 per year.1
Downsize your lifestyle. If you are a two-car household, consider switching to one. If you’re not using every room in your home, opt for something smaller. An Ameris Bank mortgage expert can help you crunch the numbers.
Retire later. Time is an investment, too. This solution will allow you to make more income now and receive greater Social Security benefits in the future.*
Seek professional guidance. If needed, consult with a certified financial planner who specializes in helping individuals achieve financial independence.
Next Steps
By implementing these strategies and utilizing banking services that align with your goals, you can achieve financial independence. Remember, the key to success is flexibility! Life is ever-changing, and more than likely, your financial situation will change, too. Continue to stay focused and adjust your budget as necessary.
If you ever need help getting back on track, don’t hesitate to reach out to your local banker. Wherever life takes you, Ameris Bank is here to support your success.
Published June 2023
Sources
* Getting Your Retirement Back on Track