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5 Steps to Achieving Financial Independence


You have a unique outlook on life, but the principles for achieving financial independence remain the same. The ability to support your lifestyle based on assets, not debt, is the basic idea, with an end goal where employment is optional. Essentially, financial independence means enjoying your lifestyle without stressing about that lifestyle not including a job.

Start Today!

Procrastination is a major obstacle to achieving financial independence because we’d all rather deal with it tomorrow. Early planning starts accumulating the money you’ll need for the future, so you won’t have to play catch-up. It is possible to attain financial independence later in life—but you won’t achieve it tomorrow if you don’t start today!

Regardless of your financial situation, the first step on your journey should be planning. Here are five things to consider when working towards your financial independence goals.

Step 1. Assess Your Financial Situation  

You need to know where you’re starting from, as well as how much to save when planning. This can help you understand what you want in a long-term financial strategy and ultimately, how you want to live in your retirement.  Regularly assess your goals to see if you’re still on track or need to make adjustments. These goals may change over time, so it’s a good rule of thumb to examine progress yearly.

Lastly, monitor discretionary and non-discretionary spending habits so your personalized financial plan suits your financial goals.

Step 2. Find Additional Sources of Passive Income

It doesn’t matter how much money you make, if you’re spending more than you earn retiring with financial independence will be difficult. First, look for other sources of other income beyond a routine paycheck. Multiple, small sources of passive income are often better than one large source that demands all of your attention.

Step 3. Update your Tax Strategy

The amount you pay in taxes varies based on your source of income, and where you keep your money. At AAFMAA Wealth Management & Trust, our Relationship Managers can offer educational resources to teach you how to minimize your tax liability if you’re overpaying, while maximizing your income and investment opportunities.

There are many types of investment accounts that can potentially help you generate wealth that is taxed lower than traditional sources of income. A couple of examples are tax-deferred accounts and 401(k)s.

Step 4. Avoid Consumer Debt 

High-interest accounts are often another barrier to financial independence. Credit cards, payday loans, and car loans all can hurt your finances and credit score.

By carrying monthly balances, you’re spending money on interest that could be used to generate passive income elsewhere. If you have debt, try to assess where you can cut spending and put those savings towards paying off your debt sooner instead.

Step 5. Learn How to Enhance Your Investments

Employer-based retirement plans are a sound investment option to build your retirement portfolio. Be sure to contribute enough money to receive the full match from your employer. Programs that offer after-tax contributions may also allow you to roll them into Roth investment accounts that can grow tax-free income.

It’s natural for the markets to fluctuate, so be sure to stick to your investment plan. As you near retirement, you may need to adjust your risk levels to help protect against market volatility.

These tips may get you started, but nothing can help you quite like an experienced financial professional who understands military members and their families.

Speak with a Relationship Manager at AAFMAA Wealth Management & Trust today to start preparing a strategy to become financially independent.