Technology is an amazing thing. It allows us to connect with loved ones from around the globe with just the push of a button. It allows us to stream videos, to work from almost anywhere, and to access infinite information. As technology progresses, so do its uses.
Take financial independence, for example. Financial independence is a big goal for many people, and now the continued progression of technology is making that dream an easier one for us to achieve.
Paul Saunders, of James River Capital, an independent Investment firm, understands the extent to which financial independence can positively impact people’s lives. Since 1995, Paul has been involved with alternative investments and believes in the power of diversification of financial assets.
Instead of using a smartphone, computer, or tablet to watch cat GIFs, we can put technology to work to help solidify our financial situation. Here are six steps that will help us do just that:
The first step to financial independence is addressing our attitude towards money. Our society has counterintuitive, and sometimes harmful, attitudes towards money that we’re told are normal. Many people go into debt every month, live paycheck-to-paycheck, and wonder where they’re going to get their next meal. This financial reality is more common than we might want to admit, and for us to avoid it, we need to work diligently.
People see financial freedom as a significant hurdle, but with some hard work, it’s an attainable goal. A good way to do this is to take stock of our current financial situation: What happens when we get paid? Where does the money go? Do we have any regrets or disappointments about our financial situation? If we can answer these questions, we have the power to make a change and hit our goals. The first step is to recognize the challenge and create a road map for how to get to financial independence. It won’t be easy, but it’s possible.
Download apps for positive money affirmations or gratitude apps to help get in a better mental space. Use tech to connect with people who have a healthy mindset towards money. Use tools like Meetup or Bumble BFF to connect with others who can keep us on the right path. This is our chance to build a supportive tribe as we embark on our financial journey.
- Set Goals
We can’t achieve financial freedom without first understanding our goals.
What does financial freedom look like to us? Does it mean being completely debt-free? Living abroad? Not worrying about money? Having enough savings to last a few months in case we’re out of a job unexpectedly?
We all have different financial goals, and we need to determine what we want to get out of our quest of becoming financially independent. Once we know our overall goal, we can set specific, measurable micro-goals that will help us get started.
For example, if we have $10,000 in credit card debt at a 12% interest rate, we must do everything we can to pay that debt off as quickly as possible. We can use technology to help us set goals. By setting goals, it will be easier to monitor progress as we go along, keeping us honest and accountable. There are plenty of budgeting and tracking apps out there, but some more common options are Mint, and You Need A Budget (YNAB).
Focusing the bulk of our extra money towards the goal of paying off debts will also help us figure out which expenses we can cut to free up a little extra money every month. Which brings us to our next tip:
- Eliminate Expenses
Now that we know our goals, it’s time to create financial breathing room. The key to financial freedom is to spend less money than we’re taking in. Staying in the positive removes stress and helps us create a cash cushion every month that we can use for debt repayment, savings, or investments.
Paul Saunders points out that the key to doing this is figuring out what expenses are no longer serving us. Are we overspending in certain areas? Can we cancel any recurring payments, like the gym, streaming services, or magazine subscriptions?
We need to take a hard, honest look at the numbers and remember that if we want to change our situation, we need to adjust our spending habits.
- Pay Down Debt
Some people prefer to tackle smaller debts first, freeing up more cash to pay off larger loans. Others prefer to eliminate debt based on interest rates, and some prefer to pay the big debts off first to get out from underneath them. The right option will depend on our unique situation.
We need to prioritize our debts and begin paying them off as soon as we can, based on what we decide is the best way forward: small loans or large loans. An excellent place to start is using auto-pay technology to make these payments without giving it a second thought.
This debt-payoff app is a good way to do that and help us visualize how our debt payoff process is going.
- Build an Emergency Fund
Once we’ve eliminated certain expenses and paid off our debts, we should have a little more breathing room in our budget. Even if it’s just an extra $50, we’re making tangible progress; any additional money is good money.
Now the key is stacking wins on top of each other. Stacking wins will turn that extra $50 we have into $250 a few weeks down the road, which eventually turns into $1,000 and so on.
A good use of this money is to build out an emergency fund. It’s tempting to address loans or debts straight away, but an emergency fund is there to keep us afloat in case of, well, an emergency. The A/C might go out, we might have a health emergency, or our car might need a new spark plug. All of these are potentially crippling expenses that we can handle if we specifically put money aside for emergencies. Even an extra couple hundred dollars (accrued over time) will help keep us from going into debt if anything unforeseen comes up. It gives us a little extra cushion to soften the blow of life’s inevitable unpredictability.
It’s not easy to save for an emergency, so let technology do the heavy lifting. Apps like Digit can help us save automatically without busting our budget.
- Save 10% of Your Income
After reducing or eliminating our debt, it’s time to start long-term saving. Ideally, we would want to save at least 10% of our income each month to help bulk up our savings, but like everything else, this is dependent on our circumstances. There is no right way to do this; there are only suggestions and best practices.
By investing our money in cash-flow-positive places like savings, retirement, and investments, we’ll be well on our way to financial independence.
The Bottom Line
Financial independence isn’t easy to achieve, but it’s certainly possible. We know that the journey is long, and we might make mistakes, but that’s okay. We just need to focus on our mindset and remember why we set out on this journey. Let’s change our habits and make our money work for us, not the other way around.