8 Steps to Achieving Financial Independence

8 Steps to Achieving Financial Independence

Whether you are in college or headed that way, when you think about the next exciting phase of your life, independence is probably top of mind. For many college-aged students, independence means setting their own rules and expectations; it may mean making the meals you want when you want them, staying out as late (or heading home as early!) as you feel like or only scheduling the classes that sound most interesting to you. But what about financial independence? How much thought have you given to becoming financially independent?

Being financially independent also means making your own rules — how much you’re going to save, how much you’re going to spend and what you want your money to do for you. The reason it’s so important for you to start managing your money now is that the financial choices you make today will set your future plans in motion. In other words, the sooner you start, the sooner you’ll be on track to supporting yourself through smart financial decisions.

Not sure where to start in your quest for financial independence? Read on!

STEP 1: Find a job

Step one is establishing a monthly income. Today, there are plenty of resources, both online and in person, to identify and apply for jobs that fit your schedule and capabilities. Don’t feel disheartened if it takes a while to find something that works for you: Holding that first paycheck in your hands and knowing you earned that money with hard work and determination will be worth it! Here are some tips for finding jobs and prepping for interviews.

STEP 2: Open a checking account

If you don’t already have a checking account of your own, now’s the time. You’re going to need a checking account not only so you have a safe, secure place to deposit your paycheck and any other income, but also so you have a ready pool of cash you can use to pay your monthly bills (rent, tuition, gas, groceries, etc.). Checking accounts typically come with online and mobile banking tools to help you track your spending and monitor your accounts, so you can truly become your own money manager.

STEP 3: Start (or continue) saving

Now that checking is taken care of, let’s talk about saving. When you get into the habit of stashing money into a savings account every month, you help ensure that you will have money when unexpected expenses arise. You can also save up for a new phone, car, vacation — whatever is on your wish list. Even if you start small, with just a few dollars a week, you may be surprised how quickly your savings adds up, especially if you keep your money in an account that earns interest. One easy way to save is to set up automatic transfers from your checking account to your savings account so you can effortlessly save a portion of each paycheck.

STEP 4: Create a budget

A budget is an easy way to keep track of how much money you have coming in and going out every month. Using an online spreadsheet, budgeting app or old-fashioned paper and pencil, add up how much money you receive each month from your job, your parents, scholarships, gifts, etc. Subtract your monthly bills and savings deposit from that number, and what you’re left with is what you have left to spend (or to add to your savings). A budget can help you identify areas where you can cut back on spending or show you where you have a little more wiggle room. This article offers an in-depth explanation of how to get your budget up and running.

STEP 5: Set financial goals

Once you’re comfortable using your budget, sit down and really think about what you’re hoping to achieve financially. Do you want to buy a car sometime soon? Are you saving up to travel during spring break? Maybe there’s a student loan hanging over your head that you’d like to start paying off. Whatever your goals, short- and long-term, take the time to write them down so you can put a plan into place for your next steps. Be sure to check in on your goals regularly — to make adjustments when needed, of course, but also to celebrate your successes along the way.

STEP 6: Build your credit

Your credit score is a number between 300 and 850 that reporting bureaus (Experian, TransUnion and Equifax) use to determine how trustworthy you are as a borrower. It reflects how well you have managed money thus far — paying back what you owe on time and in full, for example. As you strive toward financial independence, having a good credit score is key when you are trying to get a personal loan, rent an apartment, buy a car, etc. Some easy ways to start building strong credit include becoming an authorized user on a parent or guardian’s credit card, opening your own student (or store) credit card and making every monthly payment on time and in full. Here are some additional do’s and don’ts.

STEP 7: Ask questions

Financial independence doesn’t mean going it alone. There’s no shame in feeling stuck or not knowing what to do next. If you find yourself struggling with a financial decision, reach out. Talk with your parents, a trusted guardian or advisor, or a representative at your bank; chances are, they’ve been there before and can offer you valuable advice for taking those next steps.

STEP 8: Keep at it

Becoming a good money manager and claiming your financial independence takes time and effort. Remember: The work you put into becoming financially independent now is laying the foundation for your future. Every good financial habit you adopt and stick with can help you achieve your short- and long-term financial goals. Pat yourself on the back for the progress you’ve made, and keep earning and learning!
 

This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. Any reliance on the information herein is solely and exclusively at your own risk and you are urged to do your own independent research. To the extent information herein references an outside resource or Internet site, Dollar Bank is not responsible for information, products or services obtained from outside sources and Dollar Bank will not be liable for any damages that may result from your access to outside resources. As always, please consult your own counsel, accountant, or other advisor regarding your specific situation.