Independence Day is the celebration of freedom. And having the capability to live independently is a major feat. For the Millennials and Gen Zs who are in the "adulting" phase, here's a guide that can help start the move towards financial and health independence.

Every year, Independence Day is celebrated on the 12th of June. It commemorates the day when freedom was declared throughout the country. Independence is worth fighting for. It affects the lives of people not only as a nation but also as individuals.

Millennials and Gen Zs are now young adults and may already be challenged to be self-reliant. "Adulting" could be very overwhelming. For some, it becomes a scary phase when expectations for personal and professional growth are high. Fortunately, some steps can be taken to effectively overcome the challenges of adulthood. Here's a guide that highlights the steps towards financial independence.

What is financial independence?

Financial independence refers to the capacity of a person to live successfully and have the resources ready in case uncertainties in life happen. It allows one to live with flexibility and be debt-free. In addition, it helps in getting finances under control, which contributes to improved health and overall well-being.

Aside from understanding what financial independence is all about, it is also important to know the steps that can be taken toward financial freedom.

7 Steps towards financial independence

1. Be mindful of how money is spent.
It is important to determine needs and wants to identify essential from non-essential expenses. This will help one to keep track of his/her spending, avoid living from paycheck to paycheck, and stay away from debts.

2. Spend less than actual earnings.
Aside from knowing where money is spent, one should also learn how to live within his/her means. It will reduce money-related stress, open opportunities for savings, and slowly move closer to financial independence.

3. Learn how to budget.
For some people, budgeting is difficult. But with the right budgeting method, this can be done with ease. The most common types of methods include:

• 50/30/20 budgeting method - For this type, income is divided into three different categories wherein 50% goes to essentials, 30% to personal expenses, and 20% to savings.
• Zero-sum budgeting method - This method encourages one to spend all income to achieve a zero-sum budget. This means that full income will be appropriately allocated, and none will be used on unplanned expenses.
• Envelope budgeting method - This method uses envelopes to promote awareness. It allows one to see how much money is still available, the same way it helps one to be aware when all has been exhausted.
   

4. Set realistic goals.
Small and short-term goals are more attainable, making the journey towards financial freedom less difficult. Goals like avoiding the usual non-essential expenses,     such as buying coffee or ordering food rather than cooking at home, are simple cuts that are realistic and can deliver great results.

5. Increase sources of income.
Not having enough money to support essential needs could lead to problems. People whose incomes are insufficient should consider having multiple sources of income. This will spare them from financial turmoil brought by job loss, avoid debts, and get the resources to save more money.

6. Set up an emergency fund.
It is essential to set aside at least 6-month's worth of emergency funds to keep you afloat when uncertainties strike. Without an emergency fund, a   financial breakdown may quickly happen when unexpected expenses in the future arise.

7. Get insured early.
Life insurance will serve as a security blanket that will keep savings intact even when life's surprises happen. Doing it early will ensure maximum benefits from the plan. It will help protect current savings and impact your capacity to save in the future.

 

ALSO READ: 8 good spending habits to keep you away from financial distractions

SOURCE: Barnum Financial Group The Economic Times Investopedia ZipMatch

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