Celebrating the value of financial independence on July 4th

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As we prepare to celebrate freedom and independence across the country this July 4th, it’s a great time to also reflect on the value of achieving financial independence. 

In its simplest terms, financial independence means having enough money coming in to cover your expenses and make your own financial choices without relying on others. Success in this area generally relies on saving, managing or investing your money wisely, and living within or below your means to speed up the process of achieving financial independence. 

Although financial independence may seem like a far off dream for some of us, it can actually be an attainable achievement with the right financial know-how and a solid, goal-based approach. While it may not be something you can achieve right off the bat, a bit of careful planning, patience, and a long term view of your financial future can go a long way towards getting there.

Here, we’ll discuss some different approaches to financial independence to help you lay the groundwork for carving a path towards it.

How to lay the groundwork for financial independence

Start with a budget

It’s tough to overstate the value of a budget when it comes to starting your journey towards financial independence. By creating and sticking to a budget, you can live within your means, prioritize your expenses, set aside more money for savings, and keep a close eye on your financial progress along the way.

Cut down on debt

Debt can be a major hurdle to overcome as you strive to reach financial independence. While there are a variety of ways to go about reducing your debt, you can always start by paying off high-interest debts first, such as credit cards, and then tackling your other debts moving forward. The less debt you carry can help you divert the money you’re paying on interest to things that may benefit you more in the future like savings and investments.

Build an emergency fund

An emergency fund is just that—a way to prepare for emergency expenses that appear out of thin air. Emergency funds exist to help keep your financial health in good standing and reduce  stress about things that are often out of your control. 

Your emergency fund should be easily accessible and available to you upon notice. But, it should also be separated from other accounts you use regularly so you can protect your savings from everyday expenses. 

Automate your savings

Automating your savings can help you save money more effortlessly. By getting into the habit of saving automatically each pay period or month, you may even get to the point where you no longer miss having those funds at your disposal for day-to-day expenses. You can easily set up an automatic transfer from a Varo Online Bank Account into a high-yield Varo Savings Account that is purely there for emergencies. 

Invest in your future

Investing can help you grow your wealth over time and achieve financial independence. While doing so comes with some degree of risk and stock investments may take years to make a return on your money, its potential may be greater in the long run than other traditional ways of making more from your hard-earned cash. Proper research and due diligence are vital in this department.

Live below your means

Living a lifestyle below your means is a key to financial independence. If you can’t afford to live below your means just yet, ensure that you’re striving to live within your means first. It can be very easy to spend more once you make more, so try to avoid lifestyle inflation, and use your money wisely. Take some time to regularly consider and revisit both your short and long term financial goals. Where do you want to be in a year? What about in 5 years, 10 years, or even 30 years? Keeping those financial milestones top of mind may help you stay within or below budget with regard to your day-to-day spending.

Avoid impulsive buying

Impulsive buying can be a big source of debt or other financial struggles that prevent you from achieving your long term goal of financial independence. If you’re prone to overspending, try to get to the bottom of why you feel tempted to in the first place so that you can build better money management habits moving forward. Before making a purchase, consider what's essential and what's not, and try to purchase items that align with your values, needs, and goals. Constantly remind yourself of your goals whenever you’re tempted to make a big purchase or borrow money to cover one.

What is the FIRE movement?

The Financial Independence, Retire Early (FIRE) movement is an increasingly popular approach to financial independence and early retirement with the intention of enabling you to pursue your passions instead of waiting for traditional retirement age. 

Although the guiding principles of FIRE are similar to the methods mentioned above (saving, investing, living below your means, etc.), they’re meant to be done at a much more accelerated rate. This generally involves striving to make more income, saving a large percentage of it, living frugally, and investing regularly and aggressively.

While the FIRE approach isn’t necessarily for everyone, it may be worth looking into further if reaching financial independence and retiring as early as possible are what you want to commit yourself to. 

Achieving financial independence can indeed be possible if you remain focused on the steps outlined above and maintain a disciplined monetary mindset. As the fireworks light up the sky this July 4th, take a moment to reflect on your own financial journey and how you can achieve greater stability, control, and independence with your finances.

Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.