5 Tips for Your Financial Indepedence Day

Happy Independence Day for those of us in the United States.

While it would be awesome to be completely financially independent from earning money, that isn’t the financial independence I am discussing today.

Instead I’d like to talk about the financial independence where you can support yourself and don’t rely on money from your parents.

How I Became Financially Independent

I was lucky in the fact that my parents helped me through college. They paid for my room and board while I paid for my own tuition and books.

I got a nice gift when I graduated in May of that year but didn’t start my first post college job until October. I definitely was not financially independent during this time.

I finally became completely financially independent after my parents helped me move my stuff from Florida into my first post college apartment just outside of Washington, DC.

I was pretty prepared as I had been reading personal finance blogs for a while. Unfortunately, I realize that everyone isn’t or wasn’t as prepared as I was.

On that note, here are some tips to help anyone who may need them on their journey to financial independence from your parents.

Keep Your Expenses Low

Keeping your expenses low will get you far in life. If you always spend a significant amount less than you earn you’ll be able to take advantage of the opportunities that come your way. It will also set you up for the rough times.

Don’t Buy a New Car

When I say don’t buy a new car, many would assume I mean a brand new car. What I really mean is don’t buy any car that is new to you.

Take a year or two and keep your current car. Figure out what things you value most in your life. If a car is at the top of your list after that year or two and you can afford it, I say go for it.

Otherwise keep your old car until it dies or buy a car that is in line with your values.

Get Roommates

If you’ve just gone through college, chances are you’re sick of roommates. I completely understand and was in the same place myself, but there was no way I could justify living by myself near Washington, DC.

I easily saved 50% of what the rent would have been for a one bedroom by sharing a three bedroom apartment with two friends.

Sure there were some arguments, but I had that extra money I could use for other goals. In the end, the money saved was worth the minor inconveniences.

Even if you live with roommates for just a year or two after college, that extra savings can help you achieve your goals much faster than you would be able to otherwise.

Plan For The Future

What do you want to do in the next few years? Want to buy a car? A house? Get married? Travel around Europe? These goals require a significant amount of money and take a while to save up for.

It can be done, though. Start early and make a plan. Determine when you want to reach the goal and how much it will cost. Then divide the cost by the time to figure out how much you have to save each month.

One more quick note about the future. You never know what is going to happen.

You’ll run into some good luck, but chances are there will be bad luck, too. Save some cash and don’t touch it. This is called an emergency fund. Use it for emergencies only and keep it separate from your other money.

Make A Budget

Based on the above suggestions, it would be super helpful to come up with a budget. Take your income and then subtract your proposed expenses. Don’t forget to save for the future goals as well as the ultimate future goal, retirement.

Record all of your expenses and evaluate your budget monthly. You probably won’t get it perfect the first try but modify your budget until you have one that works for you.

You can’t have everything so make sure you pay attention to your highest wants and goals and spend less on things that aren’t as important to you.

If you can handle the five tips listed above, you should be well on your way to being financially independent from others.

When was your financial independence day? If it hasn’t happened yet when will it be? Is there anything you wished you knew or have questions about? Let me know in the comments!

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.

Comments

  1. I love driving my car into the ground. While I sometimes get comments about how old my ride is, I’m pleased to take the $400 they’re putting toward a car payment and use it to fund my goals. Yee-haw!

  2. Hmm..I’m more financially independent now that I’m working to pay off old debt and saving. Having a plan and a budget would have been great help when I first started college. I might not have gone into so much debt and most of my student loans would be paid off by now.

  3. I reached financial freedom when I was 38 years old. I got there by setting goals and creating a plan. It took 7 years to achieve it. I did it by investing in income property. The best part came later because you never have to work for money again. You get to put happiness above everything.

    • That is awesome. I’m definitely still considering income properties but have a few other goals to get out of the way first.

  4. I agree with the part about not buying a new car. I bought a new car when I was 20 and became enslaved to its monthly payment shortly after. I learned a great deal from that but it would have been much wiser to kept the perfectly good car that I already had.

    Good post!

    • Luckily I had cash in the bank so I wasn’t a slave to the payments. Keeping the car you have if nothing is wrong with it can be the way to go though assuming it isn’t a luxury car 🙂

  5. My car is going to be driven until the day it dies (really, until the cost of the repair is more than buying a new (used) car). I expect my car to last for another 8-10 years (it is a Honda, after all!) and I really don’t need to be buying a new car any time soon.

    I am not planning on getting roomies ever, but I do plan on renting out a suite when we buy a house. THat will be a nice mortgage helper.

    • Hondas are great! I don’t blame you for not wanting a true roommate but I would love to rent out a suite. It was a great way to start out though.

  6. I want to drive my car until it dies, but I’m afraid that lifestyle inflation will get the best of me. Hopefully I can be strong!

  7. My wife and I are all about driving cars until they die. Our ’97 accord is starting to make groaning sounds quite a bit and nobody seems to be able to figure out what’s wrong with it. We’re hoping it doesn’t break down soon but we’ll see!

  8. Not buying a car is a tough one. I myself drive a 2003 Voyager and it has been giving me trouble lately. I know I should run out betsy into the ground, but at some point you get into the “how much money should I put in this thing” discussion with yourself.

    You want to find a way to drain your savings though, go out and buy a decent car. Egads.

    • If it no longer makes sense to maintain your old car due to high repair bills there is definitely a point where it makes sense to get a new to you car.

  9. Great suggestions! My wife and I are definitely doing the “drive them till they die” thing. We also use the car with the best gas mileage when we go somewhere together. And we don’t have “his” and “hers” cars: whoever drives the most miles on a given day takes the smaller car, even though is older and you need ear plugs for the rattles.

  10. Thanks so much for participating in the Tour de PF!

  11. Personally I became pretty well independent at 22 although the parents did help out now and again. However I didn’t do it for thrift and it’s not until I reached 40 that I realized what a waste of money a new car every year is. I’ve now got a 5 year old vehicle that I wouldn’t have been seen dead in during my 20’s 🙂

  12. Agree! Making a budget and keeping my expenses low has always helped me. I don’t prefer to get ridden in the old car but there are times when I have to adjust according to my financial stats.

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