In honor of our nation’s Independence Day, this post is all about how to set yourself up for financial independence- that is, being debt-free and able to achieve your version of financial success. Keep in mind as you read through these tips that just like national independence, financial independence is something that requires a combination of work and perseverance.

Use budget/money tracking tools. The first step towards financial independence is creating a way to keep track of your money. One way to do this is the old-fashioned way with a spreadsheet (or pen and paper) if you know that you’ll be diligent about updating and checking in with yourself on a regular basis. Another option, if you want a less manual approach, is to have an app that does this for you. Some options include:

Mint Budgeting App (free)

Pocketguard App  (free)

You Need A Budget (34 day free trial/$50 per year)

Most of these apps have similar features such as categorized spending, debt tracking, credit scores, goal setting, etc. They are usually free and have some features that you can pay for if you decide to get more in-depth assistance with your personal budget.

*If you do decide to go the app route, check out our post 5 Apps for Exchanging Money and  A Guide to Cybersecurity before you start entering sensitive information into any app.

Know how much you owe. This is a simple step but an important one. Take inventory of the different loans and debts you are currently paying off and what the amounts are for each. Next create a plan for paying off your debt (we’ve written a few blogs about this (Credit Scores 101, Tips for Lowering Your Interest Rate). There are a few different plans you can implement for debt repayment. One popular one is the snowball method, where you pay off the debt with the smallest amount due, and then add-on that payment to the next smallest amount due, and keep going until everything is paid off. One of the arguments for using this method is that it provides positive reinforcement- you are able to see progress much more quickly which is motivating for many people and helps them to stay on track with their goals.

Another common debt repayment plan is to pay off the loan with the highest interest rate first. High interest rates can have a crippling effect on your finances, so this strategy is useful if you have a credit card or loan that barely seems to be budging in spite of regular payments.

Create short term and long term goals. In our post about going on a “financial cleanse” we discussed goal setting generally.  The best goals are SMART (specific, measurable, achievable, relevant, and time-bound). Another tip is to create a mixture of short term and long term goals. The reasoning is very similar to that of the debt snowball. If you only have one big goal, like paying off your mortgage in 10 years, it’s going to be a long haul and the likelihood of staying focused for that amount of time is unlikely. Sprinkling some short term goals in the mix, like “build an emergency fund of $1000 in 4 months” or “Set aside $500 for holiday gifts” can be rewarding mentally and help you stay on track.

Start a side hustle. Something that can accelerate your timeline for reaching financial success is incorporating another income source. Think about how much free time you have, and what type of work you’d be willing to do (i.e. something that involves physical labor or more along the lines of skilled data entry). A side hustle can be something along the lines of a part time or freelance job, or it can be a passion-project that you’ve always wanted to start, it all depends on your personal preference and how much free time you have to commit to something/someone else. Either way, the goal of a side hustle is to help you reach debt payoff dates quicker or increase your savings.

Consider investing. I know you may think ‘But I don’t have any money!’ but the reality is putting your money in places that’ll lower your tax burden, have higher rates of return, or build equity is something you want to think about doing. If you want something low risk, putting money in a 6 month CD will earn you more money than it would sitting in a traditional checking account. You can also start or put money in your retirement account, purchase real estate, buy stocks… anything that takes the money you have and makes it work for you. If you stop by or make an appointment, we are happy to talk with you about options Oak Bank has available. You can also set up an appointment with a fee-only financial planner to understand your options in the context of your entire financial picture.

Financial independence may seem like a fantasy, but hopefully with these tips you can start planning your journey there.