Five steps to take to gain financial independence(Read article summary)
Gaining financial independence can be a daunting task to accomplish. But once you take the first few steps, the process can be quite invigorating and empowering.
All young adults battle for independence from their parents, but finances often halt that process. As parents slow the flow of funds, an unfortunate reality sets in. Eating out every night of the week and stopping every morning for a latte at Starbucks suddenly look less appealing. To gain financial emancipation from your parents, start with these five steps:
Establish a budget.
Make a list of all of the things you pay for such as rent, utilities, food, gas and entertainment. Then make a list of all the expenses your parents cover, which might include your cellphone bill, car insurance and payments, and health and renter’s insurance. Add up your total expenses and determine how much of them your parents pay. Figure out how much extra income you would need to bring in to start taking over those bills. Consider using an app such as Mint or BudgetPulse to help keep you organized.
Set a goal.
Every goal should be achievable, measurable and meaningful. Sure, the idea is to be completely financially independent, but that likely won’t happen overnight. To help you get there, put the list of expenses covered by your parents in order of lowest to highest. Set a goal of taking on one additional bill from that list every three months or so, slowly easing into independence.
It’s always easier to spend someone else’s money. As you take over the financial reins, consider where you can trim costs. Don’t buy more food at the grocery store than you can consume. Make coffee at home some days instead of always buying it on the way to work. Drive safely to earn good driver discounts on auto insurance.
Increase your income.
Having a first paycheck is great, but starting at the bottom of the totem pole doesn’t come with a top salary. Supplement your income by babysitting or taking care of people’s houses or pets while they’re away. A part-time job, such as bartending on the weekends, can also bring in extra money.
Talk to your parents.
Start the conversation with them now about your desire to find financial independence. In addition to being excited about your increasing responsibility and no longer having to foot the bill for gas, parents can also help hold you accountable. If an unexpected expense crops up such as your car needs new brakes, try to figure out how you can pay for it without asking your parents for money. Eventually, you’ll break the pattern of turning to them for help.
Still live at home? Consider giving yourself rent and utility obligations. Pay your parents monthly for these expenses and have them put that money in a savings account for you to use when you actually do move out. Paying fake bills will help demonstrate to you and your parents that you have the means and maturity to support yourself financially.
Becoming financially independent doesn’t have to be a daunting task. It can be an empowering process that’s made easier by taking it one step at a time.