The Professional’s Path to Financial Independence

July 22, 2019

The FIRE movement is ablaze among millennial professionals — that is, the Financial Independence, Retire Early movement. These tenacious professionals have set out to do two things: 

  1. Become financially independent, meaning they have enough money to pay for their expenses without needing to be employed or dependent on others. 
  2. Retire early.

Sounds pretty nice, doesn’t it? Maybe a little… impossible?

The good news is that financial independence is possible — and it’s not just for people who strive to retire at 35. 

Here are a few ways you can get the ball rolling toward financial freedom.

Figure out why you want to be financially independent.

There are many reasons to pursue financial independence. Whether you’re thinking about racing through to retirement or you enjoy work but don’t want to rely on a paycheck, start by asking yourself a few questions, like:

  • How do I feel about my career? 
  • How do I feel about how much free time I have? 
  • Am I happy where I’m located, or do I want more geographic mobility? 
  • Would I be happy with a simpler life if that’s what it takes to achieve financial independence sooner?

Whatever your reason, it’s best to proactively evaluate what financial independence looks like for you so you can plan accordingly.

Use this roadmap to financial independence.

As with any adventure, there are many paths we can take along the way to financial independence, but directions can give us a good sense of how to get us there efficiently. Here are a few guidelines that we can follow: 

  • Choose a career that lets you grow. Rather than focusing on job stability, consider jobs that offer career security. This means choosing a career path that offers opportunity to move up in terms of skill and compensation. Ideally, this career path also belongs to an industry that is economically resilient, meaning it weathers economic downturns. 
  • Spend less than you make, whatever job you choose. This one is simple but important because it builds our savings. The particular percentage you decide to save will depend on your plan and timeline, but the bottom line is the same: if it doesn’t fit within the budget, then don’t spend it. 
  • Get a handle on your debt. Between interest rates and late fees, debt can get expensive, which makes achieving financial independence more difficult. If you’re struggling with debt, consider exploring debt management strategies like the “snowball method” — prioritizing repayment based on account balance — and the “avalanche method” — prioritizing based on interest rates. 
  • Invest surplus funds. Investing offers the opportunity to let our money work for us. This is essential for those who strive to be financially independent. Find a plan that works for your timeline, risk tolerance, and goals.  
  • Have a tax strategy. Taxes can substantially impact our financial goals. Consider an IRA — contributions can be tax deductible, and you defer paying taxes on the accrued interest until you withdraw during retirement. Roth IRAs, on the other hand, are not tax deductible, but there are no taxes on withdrawals made in retirement. Having a tax strategy that best aligns with our goals can help us maximize the amount of money we take home.

Twists and turns happen. If you miss a target, don’t be too hard on yourself. Are crucial items missing from your budget? Is it time to put some “nice-to-haves” on the budget chopping block, or do you need to adjust your timeline? Consider this a chance to regroup and evaluate what you can change.  

If you need help creating a plan or think that having a second pair of eyes on your existing plan would be helpful, know that you can always reach out to a financial professional for guidance.

Build a support system.

There’s no harm in seeking support from your family and friends. In fact, it may help you focus on your financial goals and the future you aim to achieve. 

Talking about your goals and plans with those closest to you may also inspire them to consider financial independence. If you have siblings or parents who are not on track to financial independence but would like to be, you can exchange ideas and learn together.

Sharing these experiences may be especially helpful if you are likely to retire before your parents and want to help propel your parents toward an independent future.

You don’t have to do it alone!

Whether or not you have a strong support system, a neutral third party can help you identify the strategies that pave the way towards your financial independence. 

At the end of the day, that’s why we’re here — for you and your future. 

Singer Wealth Management