Your Road Map for Financial Independence at a Young Age
Filed under: Taxes and Planning
Retirement is a top financial priority for nearly every American. For some ambitious individuals, however, leaving the working world at traditional retirement age isn’t enough. They don’t simply want to retire when they reach age 62 or 65. Instead, they want to live on their own terms and schedule at a young age, when they’re still healthy enough to be active and to enjoy their freedom.
Financial independence may sound like something reserved for only the wealthiest among us. The truth is, though, you don’t have to inherit a large sum or win the lottery to be financially independent at a young age. You just need to have discipline, a well-defined plan and a creative approach to solving financial challenges.
If you want to live a financially independent lifestyle early in life, the good news is that you can achieve it. Below are a few tips to get you started. If you can implement these behaviors into your financial decision-making, you may be able to leave your job or career earlier than most.
Become a prolific saver.
Saving is critical even if you want to retire in your 60s. If you’re looking to leave your job in your 40s or 50s, you’ll need to save at an even higher rate. The sooner you can get in the habit of saving a large portion of your income, the better your chances of retiring at a relatively young age.
Use a budget to scale back your spending as much as possible. Then allocate savings contributions to both long-term and short-term vehicles. Your 401(k) plan and IRA can be effective long-term accounts because of tax deferral, though you can’t access those funds until age 59½. You also may want to save money in nonqualified accounts, which won’t offer tax deferral, but which you can use to generate income earlier in life.
Avoid costly financial commitments.
To achieve financial independence early in life, you’ll need substantial savings, but you’ll also need flexibility. It’s tough to make the leap and leave your job if you have financial commitments holding you back.
For example, high-interest debt, such as that caused by credit cards, can be a weighty drag on your plans for independence. If you have credit card debt, make a plan to eliminate it as quickly as possible.
Also, while homeownership can be an important part of a strong financial plan, consider staying well under your maximum purchase price. A big house usually leads to a large mortgage and high costs for things like utilities, maintenance, taxes, insurance and more. Think modestly with large-scale purchases so you can keep your costs under control.
Develop flexible income sources.
Even if you do avoid costly long-term debt and accumulate substantial assets, it’s likely that you will need some kind of other income after you leave your job. The key is to find income sources that still allow you to live the schedule and lifestyle you desire.
Be creative and think of ways to tap into your knowledge and experience. Could you become a consultant or an adviser in your industry? That way, you would be able to choose when and how you work. Could you participate in the digital sharing economy and rent out space in your home, or perhaps even drive part time for a ridesharing service? Could you use your talents to give lessons and teach others?
Ready to start on your path to financial independence? Let’s talk about it. Contact us today at Ambrose Financial & Insurance Services. We can help you analyze your goals and needs, and then develop a strategy. Let’s connect soon and start the conversation.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
16293 – 2016/12/19
