Financial independence is a common goal for millennials. We grew up with the promise of the digital age, and it has given us access to plenty of information and opportunities. However, this also means our lives now are less stable than previous generations. Unlike our parents, most of us don’t have pensions or long-term benefits lined up after we retire.
Financial independence means being able to live a life of your choosing without having to worry about saving money or planning for old age. Here are nine ways you can build an independent financial future in your late twenties and thirties:
Set up a monthly investment habit
Investing for the long term is a great way to build an independent financial future. The US National Bureau of Economic Research found that people who invest in the stock market are nearly five times as likely to be of the age to receive $1,000,000 or more in retirement than those who do not invest. If you’re not sure where to start, we recommend a Roth IRA as a great place to start.
All you have to do is contribute $5/month, and your money will grow tax-free and be yours to take out as you wish. The Roth IRA is an excellent way to get started and build a positive financial habit.
Save 10-30% of your income
If your income is $100,000 a year and you make $10,000, you have less than 10% of that to save. If you make more than $100,000 a year, you likely have much more than 30% of your income to put away. The key is to find a percentage that works for you and that you can stick with for the long term.
Generally, it’s a good idea to save 10-30% of your income, depending on your age and how much you make. This will help you save for retirement, pay down debt, and have some money saved for emergencies. This percentage will vary based on your age, but it’s a good place to start.
Don’t pay off your debt until you have a substantial savings buffer
If you have a lot of debt, it’s generally a good idea to prioritize paying off your high-interest-rate debt first. This is a common financial independence strategy that is often referred to as the “debt snowball.” The idea here is that you aggressively pay off your highest interest-rate debts first and then use the extra money you were paying for that debt to pay off other debts.
Once you have a substantial savings buffer, such as 10-30% of your income, you can start paying off your mortgage and car loans. Depending on your age, this could be as early as your late twenties or as late as your thirties.
Contribute to an emergency fund
Similar to the debt snowball, contributing to an emergency fund is a way to build an independent financial future. While it’s often recommended that you have three to six months of savings in case of an emergency, it’s also a good idea to have money set aside just in case something goes wrong. This is especially important if you are in your twenties or early thirties.
The time between graduating college and getting a full-time job is often a time of significant financial stress for many millennials. If you have some money saved that you can put toward the medical bills or other unexpected costs that come along, it will help significantly. This can be done in a few different ways, such as a savings account, a high-interest savings account, or a high-interest savings account with an online lender like SoFi.
You need at least one source of income
Many financial independence strategies revolve around the concept of “income freedom,” which means you need at least one source of income that doesn’t tie you down. This can be anything from a side business to a pension. While you want to keep your job as long as you can, you also want to have something outside of your full-time job that you can rely on if you have a significant financial crunch.
Having a source of income will help if you don’t make enough money during a period of unemployment or if you have a medical expense that is difficult to pay for. Having at least one source of income is a crucial part of building an independent financial future.
Take advantage of returns on your investments
Investing for the long term is a great way to build an independent financial future. The US National Bureau of Economic Research found that people who invest in the stock market are nearly five times as likely to be of the age to receive $1,000,000 or more in retirement than those who do not invest.
If you’re not sure where to start, we recommend a Roth IRA as a great place to start. All you have to do is contribute $5/month, and your money will grow tax-free and be yours to take out as you wish. The Roth IRA is an excellent way to get started and build a positive financial habit.
Build yourself a house and sell it after you retire
The goal of financial independence is to be able to live a life of your choosing. One of the best ways to achieve this is to build a house and sell it after you retire. This is a great way to build a substantial amount of wealth and allow you to live a life of your choosing later in life. For example, you can build a house that you later sell for enough money to live off of when you retire. This can be done through a Roth IRA and a home loan.
Each person has different financial goals that are best suited for them. The key is to determine what is important to you and build an independent financial future around it. One thing is certain: If you live your twenties and thirties with the goal of financial independence, you will be better off for it.