For many Americans, retirement is the ultimate financial goal. Retirement is often associated with freedom. You’re free from the schedule and lifestyle constraints that come with a busy career. When you’re retired, you’re free to spend your time as you like, on the things, people, and activities that mean the most to you.
Unfortunately, many people don’t get the chance to experience that kind of freedom until late in life. In some cases, they may not be healthy by the time they retire and their most active years could be in the rearview mirror.
The good news is you don’t have to wait until traditional retirement age to enjoy freedom with your schedule and your lifestyle. With discipline and careful planning, you can achieve financial independence at a relatively early age. While you may not be able to fully retire young, you might be able to choose when, where, and how you work so you retain control of your schedule.
Want to be financially independent at a young age? Below are three tips to guide your planning:
Scale back and save more.
Financial independence requires a substantial amount of assets. That’s especially true if you wish to achieve your goals early in life. Even a traditional retirement could last multiple decades. If you leave the working world at a younger age, you may need to fund an even longer period of time.
That means that you’ll need to save a substantial portion of your income every year to accumulate the necessary level of assets. If you’re not saving a large chunk of your income, you may want to reassess your budget and look for ways to cut back. By limiting your spending, you can maximize your savings rate.
Be sure to save for both long-term goals and shorter-term needs. Qualified accounts like 401(k) plans and IRAs can be effective long-term savings vehicles because they offer tax-deferral, so consider maximizing your contributions to those accounts. Also build up a reserve to cover any short-term emergency costs that may arise.
Avoid costly financial commitments.
Asset accumulation is key to achieving financial independence, but so too is flexibility. You’ll likely need room in your budget to scale back and reduce spending should you go extended periods without working. To maintain that level of flexibility, try to avoid decisions that could put a long-term drag on your finances.
One example is purchases that are funded with high-interest debt like credit cards. Every dollar you pay in interest is a dollar that can’t be used to fund your independence. If you have credit card debt, develop a plan to pay it down. And be sure to avoid using high-interest debt for new purchases.
Create flexible sources of income.
You may want to leave your current career or the traditional working world, but that doesn’t mean you have to stop working altogether. In fact, in today’s digital age, there are many ways to create income that still provide schedule and lifestyle flexibility.
For example, you could participate in the sharing economy by renting out a room in your home, leasing tools or other equipment, or even driving for a ridesharing service. You could also use your skills and talents to work on the side as a consultant or trainer in your area of expertise. You’ve probably accumulated some level of knowledge and insight in a specific niche. Be creative and think of flexible ways to use that knowledge to generate income.
Ready to chart your path to financial independence? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you develop a strategy. Let’s connect soon and start the conversation.
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