By Drew Allen
How can you make sure that you are financially secure? Do you need to buy a house or have a high-paying job? The fact is that while both of these can help, neither is necessary and neither may be compatible with your values or long-term goals. There are several actions that can help you achieve not just financial security but ultimately independence. This will give you the freedom to do what you want with your life instead of always having to think about how to keep afloat financially.
Get Your College Degree
There are a few lucky people who strike it big in tech or another field, such as the arts, and make a lot of money. There are also some trades that do not require a college degree that pay reasonably well. Outside of these instances, a bachelor’s degree really is the key that will open a lot of doors for you, an entry-level requirement into many jobs. While school can be expensive, you have several different options to pay for it, including taking out Earnest private student loans. These can cover the entire cost of your tuition or can supplement federal loans, scholarships, grants, and savings.
Get Out of Debt
In general, to reduce financial stress and increase financial wellness it’s a good idea to stay out of debt with the exception of getting an education or paying off a home. However, in the former case, you should still make an effort to pay off the loan as soon as possible as well as any other debts you have accumulated, such as credit card or medical debt. One of the reasons it is so important to do this is because interest rates can substantially increase the amount that you owe the longer it takes you to pay it off. Paying off the debt with the highest interest rate first makes the most financial sense. However, for many, it will be more motivating to pay off the smallest debt first even if the interest rate is lower. Ultimately, what is more important than the method you choose is that it is one you can stick with.
Have Emergency Savings
To avoid going into debt again in the future, you should create an emergency savings fund that contains a minimum of three to six months of living expenses. You may want more, especially if you are a freelancer or you have dependents. It may take time to build this. Start small with a goal of just $500, which can make a significant difference in itself, and go from there.
The final puzzle piece in achieving financial freedom is to invest. This takes two forms. First, you should have a retirement account that you are always putting money toward. Your portfolio for this will vary based on your age, your risk tolerance and your goals. Separate from this, you can have other types of investments as well. Those can be riskier since you are not depending on them to support you after you retire. With smart investing and frugal living, you may actually be able to retire early.