While the Biden administration is said to be considering student debt forgiveness worth $10,000 to $50,000 per person in 2021, young people cannot count on government programs like debt forgiveness to get ahead.
If you want to achieve financial freedom, you have to create an investment plan and start saving money. You have the power to take control of your financial future, but you have to make changes now if you want to enjoy the financial results later on.
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You Can Escape From Crushing Debt
In 2019, only a quarter of 22-year-old adults were financially on their own. According to recent surveys, 32 percent of young adults said that student loan debt was their biggest financial concern. Meanwhile, 24 percent of young adults think that health care is their greatest financial problem.
The average student graduated with $29,200 in student loan debt in 2018. Nationally, student loans add up to $1.52 trillion. By paying off debt and making a financial plan, you can take the next step in achieving your financial freedom.
Get New Sources of Income
Unless you already have investment income, there are two main ways you can save money. You can either earn more money or cut your spending habits. While there are downsides to the gig economy, the sheer number of moonlighting options makes earning extra income easier today than it ever was before.
Depending on your personal interests, you can try doing things like:
- starting a blog
- driving for Uber
- renting a spare room
- watching pets
- selling your favorite crafts online.
You can also consider benefiting from the increase in remote work opportunities which the world is witnessing since the COVID-19 pandemic struck. Speaking of remote work, strengthening your personal brand may also help you attain more of such opportunities.
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How You Can Become Financially Independent
If you want to be financially independent, you need to start by determining your goals. For example, you may want to pay off your student loans this year or save a mortgage down payment. Once you create long-term goals, you can break them down into smaller milestones.
Make a Budget
Budgets are an important tool if you want to save money. You can download your bank statement or credit card statement to see how you are spending your money. Then, you can use this information to create a reasonable budget.
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Most likely, you will need to cut discretionary expenses like restaurant dining if you want to save money.
RELATED TOOLS: If you need help, you can try budgeting apps like Mint.
Start Paying Your High-Interest Debts
Before you pay off your debts, you should set aside an emergency fund with enough money to cover your expenses for three to six months. This fund will ensure that you are financially protected no matter what happens.
Once your emergency fund is complete, you can start paying off your high-interest debts. These debts cost the most to keep, so they should be paid off first. If you have a large balance on your current credit cards, you may want to get a low-interest card that allows you to transfer balances.
Ask for Help
No one is born with an innate knowledge of finance. Learn as much as you can about budgeting, financial planning, investing, student loan management, and other topics from books. In addition, there are a lot of great resources (discussion forums, podcasts, articles) you can find online that can help you become financially independent.
Start Investing Today
Because of the way compound interest works, you should make an investment plan and start investing right away. As your investment earns dividends and interest, these earnings get reinvested in new shares. This effect snowballs over time, so you can easily retire as a millionaire if you begin investing in your 20s and 30s. Other than tackling credit cards and student debt, investing is one of the best things you can do to become financially independent.
Nooria Khan is a software engineer turned writer. She loves to read and write on a plethora of topics. Her interests include running, personal finance, and technology. She can be found on Twitter at @Nooria_Khan.