July is approaching, and with that brings the celebration of Independence Day! The 4th of July is a good reminder that independence is a goal worth struggling for, and that it is a good time to contemplate the state of your financial independence. 

However, the concept is interpreted, financial independence requires a lifetime of responsible and well-informed financial decision making. Financial freedom can mean the moment you no longer rely on your parents to cover your expenses. For others it can be an aspiration to cover later in life living expenses without working and enjoying retirement. Whatever your goal, John Clawson, a financial consultant in Winchester, VA can help find you the right financial strategies that can be implemented at any age. 

Planning for retirement or financial freedom is a marathon, not a sprint. Breaking up your financial independence goals into smaller goals can help keep you on track while making the process a little bit more manageable. Hopefully, it will also make things a little less stressful. Even if starting off small, remember, at least you are getting started. Here are 3 simple ways to get started.

3 ways to pursue financial independence

Financial independence means that you get to make life decisions with a feeling of preparedness about the financial impact. You can control your own finances instead of being controlled by them. For many, financial independence begins at the point which your monthly income streams begin to exceed your monthly spending. 

1. Figure out where you are financially

• Investable assets: Investable assets include stocks, bonds, CD, cash, investment properties and more. Investable assets tell you how much money you have available without having to sell your physical property.
  
  
• Cash flow (income to cover expenses): Another way of looking at financial independence is having enough income to pay your living expenses. If your income can cover your living expenses, then you are remarkably closer to financial independence. Some sources for income can be: 

- Employment

- Self-employment

- Distributed Business earnings (from a self-sustaining business that brings in positive cash flow)

- Interest from bank account

- Dividend and interest from your financial investments

- Pension and social security benefits.

- Rental real estate

- Trust fund

• Your net worth: Figure out your net worth, which is an honest assessment of your current wealth. To do this, add up everything you own and its value. This not only includes things like your house and car, but also your collectibles, furniture, and property. 

If you want to know about how close you are to achieving true financial independence, you can divide what you figured out your net worth was by your annual expenses. If this number is 25 or more, then this is our idea of being close to financial independence. With that you probably could distribute a fixed 4% from your liquid assets—remember to adjust for inflation every year—and we believe a properly managed portfolio should last the rest of your life. 

Working with an experienced financial planner, like John Clawson in Winchester, VA can help you determine where you are financially, and the best process to get you to where you want to be.

2. Set and prioritize your financial goals

It is important to have a clear-cut plan for the future if you want to become financially independent. Think ahead, where do you want to be in 10 to 15 years? How do you want to invest and save money to help you achieve these goals? You also want to make sure to keep realistic goals that you can maintain.

Living within in your means can help maximize your income now. You can help by reducing major expenses or unnecessary spending and capitalize on your current salary and benefits. Many employers offer helpful incentives for savings and retirement plans as well.

3. Develop saving strategies and consult with a financial advisor

Once you have set and prioritized your financial goals, it would be wise to start saving right away. If possible, a good benchmark to start saving is 10% of your earned income. With this form of saving, you can also take advantage of compounding interest in several forms of savings accounts.

Developing options for income, like the ideas listed above, are a great way to help build your savings as well. These would be sustainable sources of income that could help achieve financial independence.

If your job offers a 401(k), you can take the opportunity to contribute to a savings account that is specifically meant to help prepare you for retirement. You can also take advantage of setting up an Individual Retirement Account, also known as an IRA, and contribute a portion of your income before it is taxed.

Seeking the advice of a financial planner can also help you find ways to save for your financial independence while maintaining your lifestyle. John Clawson offers a complimentary, no obligation, financial review to discuss your financial options.