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.
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!