Steps to Achieve Financial Independence in 2024

Financial independence allows you to live the life you desire without relying on income from a job. While achieving this goal can take years or even decades, starting as soon as possible is crucial. Regardless of your current financial situation, here are some steps you can take toward financial independence in 2024.

Understand Your Situation

The journey to financial independence is unique for each individual and family. Therefore, it’s essential to understand your current financial standing and what resources you have at your disposal. Before making plans to improve your financial situation, take stock of the following:

• Your income: Detail all sources of income, including your primary job, additional employment, side hustles, and investment income. If a portion of your income is variable, estimate your expected earnings based on the past several months and future plans.
• Your expenses: Review your expenses over the past few months to understand your monthly spending. Categorize your expenses to identify areas where you can cut back if needed to progress toward your goal.
• Your credit score: Good credit can make it easier to qualify for low-interest rates on loans, better rates for car and homeowners insurance, higher-value credit cards, and more. If necessary, take steps to improve your credit score. You can check your credit score for free with Experian.
• Your debts: List all your debts, including balances, interest rates, and monthly payments. While reaching financial independence may not require paying off all your debt, prioritize eliminating the more expensive ones.
• Your assets: Make a list of your investment account balances, including retirement accounts, and other assets that can help you reach your goal. Calculate your net worth using your total assets and debts to gauge how close you are to financial independence.

Live Below Your Means

Once you have a clear picture of your overall financial situation, the next step is to create a budget. Living below or within your means involves spending less than you earn each month, and a budget helps you achieve this. With a budget in place, you can set spending goals and make room for important financial objectives, such as building an emergency fund, paying off high-interest debt, and investing for the future.

Your budget may vary each month due to income changes, irregular expenses, and financial emergencies. However, making adjustments over time can help you adapt and stay on track.

Reduce High-Interest Debt

High-interest debt, such as credit card balances, can hinder your progress toward financial goals. Depending on your credit score and preferred debt repayment strategy, consider the following options:

• Debt consolidation: Use a personal debt consolidation loan or a balance transfer credit card to pay off high-interest balances at a lower interest rate or with a 0% APR promotion. A good credit score is generally required for debt consolidation to be worthwhile.
• Accelerated payment strategies: The debt snowball and debt avalanche methods help you pay off debt more quickly by targeting your lowest balance or most expensive debt first, then building your payments over time. This option is worth considering if you have multiple high-interest debts to pay off.
• Debt management plan: If you’re overwhelmed by debt, consult a credit counselor for personalized guidance. In dire situations, they may recommend a debt management plan, which combines your monthly payments and can help reduce interest rates and payment amounts.

Improve Your Credit Score

While a perfect credit score isn’t necessary for financial independence, having great credit helps minimize interest charges on loans, qualify for the best insurance rates, and earn better rewards with top credit cards. In addition to checking your credit score, review your credit report to understand which factors impact your score. Steps to improve your credit score include:

• Paying down large credit card balances
• Getting caught up on past-due payments
• Asking a loved one to add you as an authorized user on their credit card account
• Getting credit for other monthly bills, such as rent, utility, and phone payments, through Experian Boost®
• Applying for credit only when needed
• Paying off credit cards in full each month

With Experian’s free credit monitoring service, you can easily track your progress and receive real-time alerts when changes are made to your credit report.

Invest in Your Future

There’s no single best way to invest for the future, so develop an investment strategy based on your situation and objectives. A good starting point is an employer-sponsored retirement plan, such as a 401(k). If your employer matches your contributions up to a certain point, saving enough each month to get the full match essentially gives you an immediate 100% return on your investment.

Consider other investment options, such as an individual retirement account, a brokerage account, and real estate investing, to help create the future you want.

Be Realistic About Your Goals and Reassess Regularly

Financial independence looks different for everyone, so it’s crucial to be realistic about what’s possible based on your financial situation. While dreaming big is fine, working toward an impractical goal can lead to discouragement and loss of motivation. If you’re struggling to create a realistic plan, consider enlisting the help of a financial advisor.

Once you start working toward financial independence, plan to reevaluate your approach at least once a year. Your income, interests, and other variables will likely change over time, so regular reassessments can help you adjust your strategy to ensure your goals remain relevant.

At O1ne Mortgage, we understand the importance of financial independence and are here to help you achieve it. Whether you need assistance with mortgage services or financial planning, our team of experts is ready to guide you every step of the way. Call us at 213-732-3074 for any mortgage service needs. Let us help you take the next step toward financial independence!