This month, we observed Independence Day, an opportunity to celebrate all the liberties we enjoy in this country. And there are different types of freedoms, including financial freedom, which can open doors to many other opportunities. What steps can you take to gain your financial independence?
- Save, invest, repeat.
There’s no shortcut to achievingfinancial freedom — you have to save and invest for many years. That means taking full advantage of available opportunities. If you have a 401(k) or similar plan at work, contribute as much as you can each year, and increase your contributions when your salary goes up. Even if you have a 401(k), you also might be eligible to fund an IRA. Both are powerful retirement savings vehicles.
- Invest for growth.
How much you invest is a key factor in reaching your financial freedom, but how you invest also is important. If you’re going to accumulate the resources you need to retire comfortably and meet your other financial goals, you will need to devote a reasonable percentage of your investment dollars to growth-oriented vehicles, including stocks and mutual funds. These investments will fluctuate in value, so be prepared to accept a certain level of risk. Your individual risk tolerance will help determine how much of your portfolio should be devoted to growth investments.
- Put financial windfalls to work.
Whenever you receive a financial windfall, such as a bonus, a tax refund or an inheritance, consider putting some of it to work in your investment portfolio.
- Reduce debts.
It might be easier said than done, but try to reduce or eliminate as many debts as possible. The less money you have to pay toward debts, the more you’ll have to save and invest. If you can find ways to cut down on spending, you might be surprised at how much progress you can make toward debt reduction.
- Prepare for the unexpected.
Life is unpredictable, and some unforeseen events could threaten your ability to achieve and maintain your financial independence. Help protect yourself from this risk by building an emergency fund containing several months’ worth of living expenses and keeping the money in a liquid, low-risk account. Consult a financial professional about other protection strategies.
It will take a concerted effort to reach your financial independence, but, like all freedoms, it offers immense benefits.
This article was written by Edward Jones for use by your local Edward Jones financial adviser. Edward Jones, member SIPC
– Roberto De Jesus and Amanda Yingling are financial advisers for the Edward Jones branch on Cedarcrest Road in Acworth.