5 Steps Toward Financial Independence in 2014
• Spend less than you earn. If you take home $1,000 per week, you cannot spend more than $1,000 per week. That seems simple, but a survey released by Bankrate.com in 2013 found 76 percent of Americans live paycheck to paycheck. Resolve to live on a budget that’s below your means.
• Credit cards are a last resort. Spending less than you earn will cause your savings to grow. The savings account will be there when the car breaks down or the washing machine goes out, so you don’t have to turn to credit to handle the emergency.
• Invest for financial independence. This is not the same as saving for retirement. The goal here is to get to the point financially where you no longer have to work to support yourself. Set aside some of the money you’ve worked for today. Allow it to accumulate and grow so one day that money will be working for you.
• Pay less in taxes. Anyone looking for a place to cut expenses might start with their own tax return. Too many Americans pay more taxes than they should. Take advantage of tax retirement accounts through work and health savings accounts, if they’re offered.
• Make a plan. Baseball great Yogi Berra said, “If you don’t know where you’re going, you wind up someplace else.” This is especially true if you want to be financially independent. You need a short-term financial plan for controlling spending -- a budget. You also need a long-term plan that establishes the level of savings you maintain, a plan to get out of debt and an investment plan that will take you to financial independence.
Chinese philosopher Lao Tzu, said “The journey of a thousand miles begins with one step.” Financial independence may seem like a thousand miles now, but start the journey in 2014 is taking the first step.