Financial independence is something unique to each individual, and can be attained! Whether it be enough to live comfortably while also saving, or just enough to make ends meet, financial independence is important for people to help build and improve their lives. 

Habits to Keep in Mind

Financial independence can be defined as having sufficient income, savings, or investments that allow you to live a comfortable life without having to live paycheck by paycheck. Interested in working towards financial independence? Check out some of these habits you can pick up that might just take you to where you want to be. 

Start Investing 

Over time, investing has proven to be a great way to grow your money. Investment includes purchasing something that could either increase in value or produce a positive return at some point. Common examples of investments include stocks, bonds, Certificates of Deposit, and mutual funds. Spreading your money across multiple different investments can help to increase the chances of positive returns and lower the chance of inflation. Consider opening an online brokerage account that can show you the different ways of investing, and allow you to create a portfolio and make contributions to it. This can be particularly important as 41% of small business owners identify inflation as their primary concern, emphasizing the need to explore investment strategies to safeguard and grow their assets in an inflationary environment.

When considering entering the stock market, it's beneficial to start by looking into specific stocks that could diversify your portfolio and enhance your returns. For example, examining the asx cgr performance can give you insights into the potential growth and profitability of investing in such stocks on the Australian Securities Exchange.

Manage Your Credit Score

Your credit score is a factor that goes into determining things like the possible interest rate when buying a new car or home. Your credit score also affects other prices you pay that include essentials such as car and life insurance premiums. Credit scores have so much of an impact because they act as a record of your financial habits. If someone is reckless when it comes to finances, then they are likely to also act reckless in other areas of life as well.

Monitoring the fluctuation in your credit score each month can give you an insight into how you are managing your credit. When you look at your own credit, a soft inquiry is pulled which means there will be no effect on the credit overall. 

Bureaus like FICO and VantageScore have scores that will range from 300 to 850. A score of 700 is considered "good," but the better your credit score is, the better interest rates and terms you’ll be offered by potential lenders.

Always Spend Less than You Earn

Overspending is not an uncommon issue, but there are so many ways to help budget your money so you don’t feel like you have to overspend. First, you should set boundaries between things that you need versus things that you just really would like. You can create a budget that will list your essential expenses, which is going to include payments towards housing, food, utilities, and insurance payments. A shortcut to budgeting used by many is the 50/20/30 rule.

The 50/30/20 rule consists of three categories of spending. These categories include 50% on needs, 30% on wants, and 20% on savings:

• 50% needs: Needs are considered those bills that you absolutely must pay and all things necessary to survive of course! These needs can include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment, and utilities.
• 30% wants: Wants are all the things you WANT to spend money on that are not essential. These wants could include going out to eat, buying a new handbag, etc.
• 20% savings: Try to pitch in about 20% of your net income to savings and investments. This can include adding money to an emergency fund in a bank savings account, making IRA contributions to a mutual fund account, and investing in the stock market.

Prepare for Retirement

It’s never too early to start saving for retirement, no matter how old you are! The sooner you get started the less you’ll need to save. It’s recommended that those who are just in their 20s save between 10-15 percent of their gross salary towards retirement. In your 30s, that increases to 15-20 percent. Many companies will offer a 401 (k) match, but you can also open up a traditional or Roth IRA if you’re on your own. If you’re young, Roth accounts are highly recommended because withdrawals are completely free after age 59. You could also be in a higher tax bracket by then!

Remove Yourself from Debt

Debt can be a big financial burden, that can just accumulate and get worse over time. If you think that your debts could be preventing you from reaching more of a financial independence, check out some of these tips you can follow to help get some of that weight off your shoulders.

• Keep up with your budget: As mentioned previously, the 50/30/20 rule is a great way to keep up with a realistic budget. A good budget should work to eliminate some of that unnecessary (yet costly) spending, while also meeting essential expenses and contributing an amount towards any potential debts.
• Debt reduction plan: When keeping track of your spending habits, you can work to establish realistic payment amounts and deadlines towards getting some of those debts paid off. 
• Adjust plans when needed: Life happens, and sometimes our income and other expenses will fluctuate. Adjust your debt reduction and budget plans to wherever it is most reasonable, and use any increase in income towards payments working to decrease debt.
• Rewards every once in a while: Occasionally, treat yourself to some smaller rewards when taking the steps to reach financial independence. Whether that be going out to your favorite restaurant to purchasing some new shoes!

Keep Old Accounts Open

If you have a credit account with a solid record of paying bills on time, don’t close it! While it just might make sense to close an account after it’s no longer being used, lenders and creditors are always looking for evidence of responsible financial habits. Closing a credit card account could actually have an adverse effect and damage your credit score, because your maximum credit limit is lower. Just keep the card at a $0 balance instead!

Remain Mindful & Patient 

As you begin the journey to financial freedom, keep these tips in mind and always stay mindful regarding your spending and saving habits. Trust the process, and you’re on your way to achieving lasting financial independence.