When asked about coming-of-age milestones that mark a person’s transition into proper adulthood, people usually bring up the attainment of financial independence. Nothing says “adulting” quite like being able to earn one’s own money and, on top of that, being able to make major financial decisions without being tied to anyone else. Once you’ve hit that point for yourself, it will permanently transform your life for the better. It will reflect well not only on your personal finances but on how you perceive yourself and how others perceive you.
But why is financial independence something you should aspire for as soon as possible, and what concrete steps should you take in order to achieve it? To answer those questions, here’s a roadmap that any young adult can use on their journey towards financial independence, courtesy of RBank Digital, Robinsons Bank’s official digital banking platform.
What Are the Benefits of Attaining Financial Independence as a Young Adult?
Financial independence is not something that can be achieved overnight, and you shouldn’t be in a hurry to clock off on every single one of your financial goals if you’re still studying or getting a feel of your first job. But as early as now, you should include it among your long-term goals and work towards realizing it through better financial habits.
Among the best reasons to attain financial independence as a young adult are the following:
You’ll Become More Disciplined and Responsible about Your Finances
From when you first start working towards financial independence to when you actually achieve it, you will learn how to become more accountable for the money you spend. Instead of thinking of finances as an afterthought or someone else’s responsibility, they’ll be yours and yours alone. This change in mentality, as well as in your financial situation, will make you more disciplined and thoughtful about your actions.
You’ll Be Less Dependent on Other People
Another great advantage of finally gaining financial independence is that you will no longer be indebted to others. There are fewer constraints on what you can spend and what you are able to do for yourself when you no longer depend on someone else’s money. It may also eliminate your worry about being a financial burden on your loved ones. When you attain financial independence, you can take charge of supporting yourself—and you can even pay it forward by supporting family members and other people who helped take care of your needs.
You’ll Be On Track to Attaining Greater Personal Wealth
It goes without saying that you won’t be able to build your personal wealth until you become financially independent. When you’ve hit the point where you can take care of your basic needs and more, you’ll be able to pocket wealth for bigger dreams like traveling, furthering your education, or starting a business. Come closer to building your personal wealth by establishing financial independence for yourself.
You’ll Feel Empowered and In Control Over Your Life
Lastly, when you reach a point where you’re truly financially independent, you will feel like a great weight has been lifted off your shoulders. You’ll be less worried about making ends meet or getting through emergencies like severe bouts of illness or injury. Your mind will also be clearer when it’s time for you to make major financial decisions that will affect the rest of your life, like buying your first home or setting aside money for your wedding. Gaining financial independence will make you feel like a true adult or someone who is grown-up enough to be in charge of their future.
7 Ways to Become More Financially Independent
The road to financial independence may seem like a daunting one, but with discipline and focus, you will be able to clear it. Here are seven tips for managing your money and developing good financial habits that will benefit you throughout your adulthood.
Discern Your Financial Goals
The first thing you need to do is to envision what true financial independence looks like for you. Different people have different financial goals, and one person’s idea of being fully independent may vary from another’s. What matters in your situation is that you know what exactly your goals are and what constitutes financial independence for you. Whether your chief measure of financial independence involves paying for your own room and board or joining your first credit card program, make sure to stay true to your own terms.
Make It Your Priority to Pay Off Any Existing Debts
Second, if you have any outstanding debts for your school fees, the vehicle you currently use, or your current housing arrangement, make plans to pay them off. You will only be able to get to square one of a financially independent life if you are not bound to your previous debts. To make factors like interest payment more manageable for you, explore a payment plan and make a schedule to pay off your existing debts as soon as possible.
Make a Monthly Budget and Identify Your Most Important Expenses
Third, take account of everything you spend in your day-to-day life through a monthly budget. This should include necessities like groceries, electricity, water, fuel, medicine, and internet connectivity as well as other expenses for your hobbies and interests. An important part of being financially independent is knowing how to manage your money on a regular basis and being aware of which expenses you should prioritize. Remember to adjust your budget as needed, and try your very best to live within your means.
Set Aside a Specific Portion of Your Income for Your Savings
Fourth, be sure to allot part of your income towards your savings. It would be good for you to augment your savings on a monthly basis and only touch them in case of a dire emergency. You can start by determining a fixed amount or a certain percentage of your income to go into a savings account. If you think you’ll forget to add to your savings, consider getting your bank to auto-debit that amount every month. You never know when bad fortune may strike, but as long as you have your savings tucked away somewhere, it won’t be as hard for you to recover and continue living a financially independent life.
Learn How to Take Care of All Your Banking Needs
One task that you will have to master as an adult is taking care of your banking needs. Luckily, it’s easier than ever to open an online banking account and transfer money, pay bills, and top up your e-wallets with it. Take full advantage of the opportunity to use technology in your banking journey, for example by downloading your bank’s app and settling your day-to-day transactions through mobile banking. Cultivate a sense of financial independence and responsibility by keeping track of your account’s average daily balance (ADB), paying your bills quickly and on time, and making sure you’re up to date with your loan and credit card payments.
Look into Options for Investing or Earning Passive Income
Being young comes with its advantages, like having more time and energy to explore new methods of compounding your personal wealth. While you can still commit to doing so, consider tapping into a source of passive income or pooling your money into a legitimate investment vehicle. Some examples of great options for young adults include high-yield savings accounts, treasury bonds, and variable universal life insurance.
Consider Getting Advice from a Financial Adviser
If you think you’ll need additional help in your quest toward financial independence, or if you’d like personalized input on how to gain financial independence given a specific time horizon, you can enlist the services of a credible financial adviser. Choose someone whose approach to managing money resonates with your lifestyle and personal financial goals, and look for the kind of arrangement that allows you to pay favorable fees.
Again, it’s important to remember that you won’t be able to achieve full financial independence at the snap of a finger. While it’s true that becoming financially independent at an early age means that you have more time to pursue your goals, you shouldn’t think of it as a race against your peers. Even as you make plans to level up your money management skills, don’t forget to be patient with yourself as well as honest about your current limitations. Take steps to become more financially responsible, but start small and make sure to learn about the various options available to you.
You may be within a year of securing full financial independence, or it may take you more time than that depending on your circumstances. But once you realize that you are no longer tied down to others and that you have full freedom and control over your financial decisions, the hard work will be very much worth it.
For banking products and services that will help you along your journey toward financial independence, check out what Robinsons Bank has to offer. Find the RBank Digital app in the Google Play Store or download the RBank Digital app from the Apple App Store. Sign up at RBank and enter into this stage of your adulthood with confidence, poise, and a sense of purpose!