As we celebrate the Fourth of July, the American values of freedom and independence are top of mind. These values also can apply to your financial life. With this holiday around the corner, it’s a good time to set yourself up for financial success by committing to becoming free from things like debt and financial stress while preparing for your financial independence.
Here are four planning elements to consider when thinking about financial independence:
Watch Debt Levels
Many people go into retirement with a lot of debt. Aim to have a financial plan that enables you to be debt-free by retirement. Have an emergency reserve so you don’t have to create debt in the event of an unplanned emergency or opportunity.
Protect Against Unforeseen Troubles
It’s important to carry enough of the right insurance: health, life, disability, etc. You can have the best financial plan, but if something happens, you can lose it all without the right kind of insurance to protect you and your family. Research the best policies that fit your circumstances and speak to an advisor about your options.
Save First & Live on the Rest
Develop a plan with goals based on what’s important to you, identify how much you need to save to reach these goals and then live on the rest. This is different from the traditional route of living on less than you earn, which can be too vague of a plan. Many people go through life with the best intentions of saving everything they don’t spend. However, there’s often nothing left to save. Put saving first.
Take Control of Spending
Controlling your spending is a bigger problem than many realize. As your income increases, it’s not uncommon for lifestyle and spending to grow as well, making it increasingly challenging to save enough to retire in the lifestyle to which you have become accustomed. Go ahead and enjoy your rising income but try to save 50 percent of each raise to increase your chances of enjoying financial independence.
On the road to financial independence, it’s important to keep in mind that having a solid, long-term plan is key. Our Financial Planning Philosophy & Core Beliefs can provide additional information on crafting a comprehensive financial plan.
Contact your BKD advisor if you have questions.