Money

A Guide for Women Who Want Financial Independence

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Financial independence can mean a lot of things to different people depending on where they are in life. Nevertheless, some things are similar to everyone. Basically, it implies that you can live comfortably without relying on support from relatives or continuously borrowing some money. Most importantly, you understand where you want to be in a few years, and you have an actionable plan to help you achieve the financial goals.

As far as gender equality is concerned, there have been major strides to achieve great milestones. But when you look at finances and women, there is still room for improvement. When a woman is earning lower wages than a man over a long time, the propensity to save is lower and this means that the impacts may be tremendous by the time retirement years catch up with you. The good thing is that you can take action and change the trend that would be otherwise unfavorable to your future. If you see your financial situation as a wakeup call to embrace a different path, this guide can help you ensure your financial independence in the long run.

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Some people like the idea of financial freedom but they are too afraid. Their fear is not for the good things that come with the freedom, but they are scared of the drastic changes they must make to achieve the goal. If you haven’t been practicing financial planning for a long time, you need to understand that it’s not about moving from zero to a millionaire in a week. Besides, even your trainer at the gym will be reluctant to ask you to work out beyond your capacity when you have just enrolled for training sessions. The point is selecting an attainable target and work on it until you hit the bull’s eye, according to Knowledge First Financial.

To illustrate, if you want to save more, it may be a bad idea to set aside three-quarters of your salary. Instead, pick a manageable figure like $30 and save that until you are comfortable to raise the amount. This will also help you build the stamina for a long-term savings plan.

Without a heartfelt conversation with your inner being, sticking to your financial goal can be very difficult. At the same time, it is quite important that you understand several things like defining financial independence, your financial situation at the moment, and what has to go in order to realize your goals.

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Create actionable steps to help you get to your goal

Financial independence is seldom one huge goal but it is made of several smaller goals achieved over time. For you to quickly reach the objective, you have to make sure you make solid goals touching every area of your life.

Increasing the income streams and limiting how you spend the money can go a long way in helping you realize the objective. Also, determining the best way to deal with debt so that you can save more money is a must have on your list of goals. Your investment vehicles and long-term financial objectives play a massive part in ensuring that you will have something to spend in retirement and leave to your heirs.

Make a decision to spend less than you earn for the long-term

This is perhaps the most important thing for anyone who wants to attain financial freedom. Basically, everything else you intend to do will be possible after you have committed to this goal. It is the lifeline of your long-term goal because it ensures you have the money to drive other goals. Financial independence means you have mastered the principle of living within your means and if you haven’t managed to develop this habit, be ready to get very uncomfortable until you master this.

Delayed gratification is something you must get familiar with and there are no cutting corners here. What this means is that you can forego the urge to spend now so that you can offer a better life for your kids. If your finances are in bad shape at the moment, you must be willing to make painful changes and stop spending money on anything that doesn’t add value to your life. At times, you will be forced to lower your allocation on items that matter.

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This means you might have to drive your old car for several years, give up vacations, and limit the times you visit the mall to buy new clothes. While this may look like a punishment, you will be paving the way for a better future and it’s worth the sacrifice.

Focus on business or career growth

When you raise your income, you also increase your propensity to save for your financial goals. If you are employed, figure out how to stay sharp and offer more value to the employer. Always look for promotions in your current job and be keen to spot better opportunities in other companies. But if you are in self-employment, you have to focus on steady business growth, which in turn will increase your cash flow.

Whether you run your own business or in self-employment, investing in yourself is important because you will reap the returns many times over. Most importantly, self-employed people have more than one boss to deal with and the best way to improve the services is by asking them if there is an area that needs improvement. By simply asking if they are facing a challenge you can address you become of great value to them and this implies that your chances of earning more have gone up.

Make diverse investments

After you have built a good investment fund, your attention should be directed toward fueling the investment account. If you take a look at the economy, you know that sometimes can favor investments than others. But it’s not easy to predict the future and this means you can’t stop your investment plans. Invest regularly irrespective of the markets and you will have lower risks compared to people who invest once in a while.

Nevertheless, if you think the time is not right to invest, reduce your investments in volatile channels and instead focus on those that offer fixed income. As such, you will have the money to make bulk investments when you think the conditions are right.

If you want to be safe, try always to diversify the assets across various classes. For instance, spreading your funds across fixed-income assets, stocks, real estate, and natural resources will cushion you from hefty losses in the event where one industry losses its appeal.  

Shield your income from taxes

Taxes have a way of eating into your income and in the end, you will have a lower amount to eliminate debts, save and continuously invest. If you can reduce the taxes charged on your incomes, you will have more cash in your basket. One of the easiest ways of protecting your money is using the retirement accounts. As such, you should make the highest amount possible to benefit from employer matching funds.

At the same time, IRA’s will help you defer any taxes on your income from investments assuming you can’t qualify for a tax deduction. But if you are in self-employment, creating a retirement plan can be quite useful since you can protect about 20% of your income from taxes.

Eliminate your debts and stay free

You can’t say you are truly independent when you have several debts or installment loan in your name. You should make it your objective to clear out any money you owe. If you are decided, you can deal with the student debts, mortgage, short-term loans, and credit card debts.  The good thing is that you don’t have to clear everything at the same time, but you can set a time frame for each one of them.

If you have expensive debts, consider a debt consolidation plan but ensure it helps you stick to your long-term financial goals rather than pulling you backward. Once you eliminate the debt, do your best to stay without credit from the same category and focus on paying other debts.  

Achieving financial freedom is never an easy task. But if you have the commitment to follow a working plan, you can accomplish the objective in the end. As a woman, this isn’t something you can treat simply because it is necessary for a fulfilling life. Besides, you definitely want to live a good life and offer your children a better future.

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TUT Staff
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