July 4th is a day to think about national independence, but we’ve decided to take this a step further: What’s the cost of personal independence?
Financial independence means:
- Not being tied to any other person because of your finances: Money is not a reason to stay in a bad relationship, since no one holds your purse strings but you.
- The freedom not to accept a job offer you hate, and stick it out for something more up your alley.
- The money to get up and leave a bad situation.
- Being able to do what you want, to dictate your own life: You can up and travel around Asia for a month if you’re in a place where you have to get away from everything else.
- Not every purchase is life or death; a nice dinner with friends won’t sink you into debt, and buying a dress that makes you feel confident won’t make you miss rent.
So, what’s the roadmap? Here’s how we break it down. The goal is that, by age 30, you’ll have these 6 things in place. Before you get too anxious, remember that LearnVest is here to help you achieve these goals:
1. A Credit Card in Our Own Name
You need a credit card in your own name to build your credit score, which is an absolute necessity. It needs to be in your own name so that you’re not dependent on anyone else!
2. A Credit Score of 760 (Or Close!).
Your goal is to work toward a credit score above 760; the best way to do this is by paying all of your bills in full every month. (Here are 9 more ways to see an immediate credit score improvement.)
3. A Sizeable IRA
On the order of about $15,000 or more. Here’s how we figure: The goal we would love you to achieve is to max out your retirement account every year (contributing $5,000 per year). The ability to do so will vary greatly depending on your life situation, but contributing even $3,000 per year starting at age 25 should leave you with about $15,000 in your account, depending on the market. Remember that the earlier you deposit your money into an IRA, the more potential it has to grow. Feel like you can contribute more than that? Great! Do it. Feel like you can’t even get close? Email me directly at firstname.lastname@example.org to be signed up for our free upcoming bootcamp (“I Need To Cut My Costs” Bootcamp).
4. A Decked-Out Emergency Fund
Your emergency fund should cover six to nine months of living expenses. So, if you can live conservatively on about $2,000 per month, you should plan to have close to $18,000 tucked away. If you’re not there yet, reading the LV Daily, following our checklists and joining our bootcamps will help you get there. We’re here to help. After all, this money isn’t for a rainy day—it’s for a monsoon.
5. No More Bad Debt
Credit card debt is bad debt. By age 30, your goal is to have zero credit card debt. This is your first priority!!
6. An Extra Savings Account
This is money for your future. It could be for a home, a wedding, future children, or anything else important to you. Since these are all big-ticket items, plan to have multiple thousands of dollars in it—that’s your goal.
When your finances are in order—which they will be if LearnVest has anything to do with it—you’ll have the freedom to go where you want, do what you love, and be who you are.
Happy Independence Day!