Money matters may focus on numbers and values, but the ability to be financially independent gives you a state of mind that is priceless.
There are many reasons to strive for financial independence. You may lack familial financial support or even have an unpleasant or unsafe home life that requires you to safeguard yourself wherever possible.
Even if that isn’t true, you might simply be filled with personal drive and a desire to succeed.
The ability to establish yourself as a financially independent person is one of the most important and rewarding steps that a young individual can make.
Here are a few tips and recommendations to help you set yourself up as a fiscally responsible, financially literate human being, even at a very young age.
The Struggle for Financial Literacy
“Financial independence” is an interesting term that can have several different meanings.
For instance, when taken literally, true financial independence typically means you have no need to work or depend on others (including a paycheck from an employer) for the rest of your life. This is a rare form of financial success that very few individuals have achieved.
However, a far more commonly used version of the term refers simply to the concept that you, as an individual, can take care of yourself when it comes to money.
From rent to car payments, groceries to Christmas gifts, if you can pay for everything yourself, you’re financially independent in the eyes of the world.
Financial freedom has been a growing concern for many in recent years. In fact, many Americans, in particular, have come to feel that parents remain far too involved in their children’s lives.
Regardless of whether this is the fault of the parent or the child (or both), it doesn’t change the fact that, according to Pew Research, less than one-quarter of 22-year-olds achieved financial independence in 2018. By comparison, nearly one-third did so in 1980.
Finding Financial Freedom as a Youth
With the number of financially independent youths dwindling, it’s important to do your part as a member of the younger generation to facilitate your own fiscal freedom. Here are a few suggestions for ways to do so:
Create Your Own Budget
A solid budget is ground zero for good money management. By creating a financial plan, you can establish a firm understanding of your financial state at any given moment.
So add up your income and expenses (be brutally honest), build up an emergency fund, pay down debt — and make sure to keep your budget up to date at all times. As you gain a greater perspective of the state of your finances, try setting goals for yourself.
“It can help to focus on having specific short- and long-term goals. This can make a budget (and more expensive future goals) feel more achievable. It is important to consider your unique circumstances; what works for a friend may not work for your situation.”
Build Your Credit
Unless you’re going to live under a rock, you’re going to need to borrow money at times. From cars to school loans to a mortgage, there are plenty of areas where borrowing some cash will help you achieve your life goals. That is, it can help if you borrow responsibly.
One of the best ways to set yourself up to borrow money in a responsible manner is to keep your debt to a minimum. With that said, it’s still wise to take out a credit card or an auto loan as soon as you’re able in order to start making payments.
This can do wonders in building your credit score, as two important factors are the length of your credit history, and your payment history. According to Fiscal Tiger’s Desmond Rhodes, “It is critical that you develop the habits involved with building a good credit score as soon as possible to increase your chances of buying a house or car, avoiding financial stress, and courting a better quality of life.”
Learn to Use Your Money Responsibly
If you want to be financially savvy, it’s also important that you consider how and where you spend your money. This shouldn’t be an occasional consideration, but a consistent theme throughout your monetary interactions.
If you’re buying groceries, are you wasting money on too much junk food? If a friend or family member asks for money, are they going to pay you back or could the situation potentially drag down your credit?
Managing your money can be tricky, confusing, and at times both emotional and overwhelming. As you learn to do so, remember that you want to strike a balance between generosity and responsibility. In other words, you want to walk the line somewhere between being taken advantage of and being a scrooge.
Make Long-Term Plans
As a young person, you’re likely sick and tired of being asked what you’ve accomplished. And that’s a totally understandable feeling. However, when it comes to your own personal thoughts and opinions, it’s still smart to take time to set long-term plans and objectives.
This is true with your finances as much as anywhere else. These don’t have to be “set in stone” goals that you have to achieve at all costs. However, having a plan or a goal in place can help to keep you focused and moving in the right direction over time.
These kinds of goals can consist of anything from saving up for a house to building an income from your own business. Your goals are important, and to achieve them, you must take the time to consider where you want your finances to be in the future.
Setting up on Your Own
Financial independence is a huge part of the maturation experience. The feeling of self-reliance and the ability to take care of your wants and needs on your own are critical aspects of establishing yourself as your own person.
So consider the above tips. What have you already addressed? What areas are lacking? Now use that knowledge to create a clear path that can lead you to financial independence in the months and years ahead.
Dan Matthews is a freelance writer with a penchant for financial wisdom and solid research. You can find him on Twitter @danielmatthews0 and LinkedIn.