You’ve probably heard how hard it is to save money and how difficult it can be to get ahead. But the truth is, financial independence isn’t as far away or as out of reach as you might believe. If you set yourself on the right track now, you could be financially independent in five years or less by following these simple steps!
In this article, we’ll tell you how to become financially independent in five years.
We know how difficult it can be to put money away for anything, especially if you’re flat broke all the time. The good news is that having a little bit of money set aside for emergencies or unexpected situations can help you start improving your financial situation and saving more quickly.
Even better is that this doesn’t have to be a large bank account with lots of zeros in the balance. Even $500 will do.
If you don’t already have an emergency fund, create one today. Don’t give yourself any excuses. Just save until you can put $500 into savings. Believe us; your future self will thank you later.
Now that you’ve got your emergency fund, you can start working on how to get out of debt and how to save money.
One of the best ways to better handle your finances is by creating an actual budget. This means writing down how much money comes in each month (your income) and how much goes out each month (expenses).
This can seem like a daunting task if you’ve never done it before, but once you have your first written budget, all that’s left to do is follow it.
If you don’t want to try the traditional pen-and-paper method, there are plenty of online programs that let you set up a free account and add transactions as they happen.
Here’s a financial planning 101 tip. It’s easier to save money when you never see it. And that’s how automation can help.
Automating your finances means setting up programs and accounts to automatically direct your income into specific areas such as savings and debt repayment without having to think about it too much. This way, you won’t be tempted to spend the money on anything else.
If you want a little extra help with this process, some banks now offer free online budgeting tools with their accounts. These can help keep track of how much is being set aside for specific items or how much is being spent each month to have an overview of what you’re spending on.
Now that you have an emergency fund and a budget, your goal should be to live debt-free. So, it’s time to start paying off debt.
The less money you spend each month on debt payments, the more quickly you can become financially independent because every dollar saved gets compounded by earning interest. When you start saving even small amounts of money, you’ll see how quickly your savings can add up.
If you owe student loan debt, get started on how to pay it off before it becomes any larger.
Becoming financially independent in five years or less isn’t a pipe dream. It’s a reality that can be yours if you start working immediately to get ahead. And it only takes a few simple steps (and money management discipline) to achieve your goal.
We hope you enjoyed our guide on how to become financially independent. If you found this article helpful, please check out the others on this site.