During my university years, I lived a life many would consider privileged. My parents provided everything I could possibly need: a comfortable home, a refrigerator always stocked with food, a car for my personal use, and even a credit card for those times when my wallet felt a little too light. It wouldn’t have been far-fetched for my friends to assume that I would remain financially tethered to my parents well into adulthood.
However, a turning point came, and with it, a profound realization about the importance of financial autonomy. Among the many steps I took toward independence, enrolling in self-development courses was a game-changer.
These courses, ranging from financial literacy to personal growth and entrepreneurship, provided me with the knowledge and confidence needed to navigate the complexities of financial independence.
This post is designed to share that wisdom with you. In addition, the expert tips contained here can pave the way to your financial empowerment.
Steps on How To Become Financially Independent From Parents
The journey to financial independence from your parents is a pivotal chapter in the book of adulthood.
It signifies the shift from relying on family for financial backing to taking control of your own economic destiny.
Here’s how you can do it.
1. Assessing your current financial situation
Begin by meticulously tracking your spending to gain clarity on where your money is going. This involves recording all expenses over a certain period, typically a month.
With this data in hand, craft a budget that categorizes your spending and sets limits for each category. Identifying areas where you can cut back, such as non-essential expenditures, is crucial in this phase.
Budgeting is the cornerstone of effective financial management. It’s about understanding your income and expenditures, and making conscious decisions about how to allocate your resources. Use budgeting apps, spreadsheets, or simple pen and paper—whatever works best for you.
2. Setting financial goals
Establishing clear financial goals is vital. This includes both short-term objectives, like paying off debts or saving for an emergency fund, and long-term aspirations, such as homeownership, retirement savings, or starting a business. These goals will guide your financial decisions and strategies moving forward.
In terms of emergency fund, the goal is to have three to six months’ worth of living expenses saved in an easily accessible account. This fund provides peace of mind and stability, preventing you from falling into debt when unforeseen costs arise. Start small, if necessary, and build this fund over time. Consistency is key, even if you’re only able to save a small amount each month.
Erman Kuplu of GA4 shares the same perspective.
“Yes, you should eventually be able to support yourself financially without your parents' help, but that won't happen overnight if you're strong enough to quit cold turkey. If you want to reach your fiscal objectives, my recommendation is to create a timeline and divide them into several goals that are simpler to accomplish. You will come closer to your goal as you complete each objective. Your primary goal should be to decrease costs as you wean yourself off of your parents' monetary support.”
3. Building your income
Enhancing your income is pivotal in achieving financial independence. This can involve upgrading your skills and education to boost your employability and earning potential.
Additionally, exploring multiple income streams, such as part-time jobs, freelancing, or entrepreneurship, can provide a significant boost to your financial resources.
Let’s talk about trending income streams in 2024.
In 2024, there are a variety of additional income streams you can consider to enhance your financial portfolio. These range from investing in dividend-yielding options, engaging in the gig economy, to leveraging online platforms for passive income. Here’s a comprehensive overview based on the latest trends:
- Invest in dividend-yielding options: Consider saving a portion of your salary in high dividend returns options like dividend-based savings accounts, insurance plans, or mutual funds.
- Real estate and rental income: Platforms like Airbnb allow you to list spare space for rent, offering a way to generate income from property you already own. Additionally, investing in real estate platforms with a low entry barrier, such as Arrived, can provide quarterly rental income with minimal effort.
- Peer-to-peer car rental: Utilize platforms like Turo or Getaround to rent out your car. These services offer a structured way to earn money by listing your vehicle for others to use.
- Offer services or freelance: Offering services based on your skills, such as tutoring, freelance writing, bookkeeping, or photography, can be a lucrative way to earn additional income.
- Sell items online: Platforms like eBay, Amazon, and Etsy provide avenues to sell items you no longer need or handmade crafts and digital products, turning a hobby or skill into a profitable venture.
- Create and sell online courses: With the rise of online learning, creating and selling courses on platforms can be a significant source of income if you have specialized knowledge in a particular area.
- Passive income through investments: Investing in dividend index funds, exchange-traded funds, bonds, high-yield savings accounts, and CDs are recommended for those looking for a hands-off approach to generate income.
- Digital ventures: Buying and selling domain names, licensing photos, creating mobile apps, and self-publishing books are digital avenues to explore for additional income.
- Engage in the gig economy: Opportunities like delivering food with Instacart, becoming an Uber driver, or even pet sitting offer flexible ways to earn extra money.
- Sustainable product development: Developing and selling eco-friendly products is not only profitable but also meets the growing consumer demand for sustainable goods.
- AI and machine learning consulting: If you’re tech-savvy, AI and ML consulting could be a lucrative side hustle, as businesses seek expertise in leveraging technology for operational efficiency.
- Personal branding services: Offering personal branding consultancy, helping individuals manage their digital footprint and personal brand online, caters to the increasing importance of online presence in professional success.
Harrison Jordan shares his insight about getting additional sources of income.
“Amass More Wealth: I know it's easier said than done, but if you're in this situation because your income isn't where it should be, you need to start implementing improvements right now. You may already be in the process of applying for a new, better, and more lucrative job. Since that may take some time, you should seek out ways to earn additional money, such as a part-time work. If you work just 10 hours additional each week, you could be able to save or pay off debt around a couple hundred bucks each month. You could find thousands of projects or jobs offered everyday on Upwork.com, so you can monetize your talent by becoming a freelancer. In the meantime, this will cover expenditures until a position with greater pay becomes accessible.”
In addition, you can also monetize your passion. This is a great advice from Alyssa Huff, a real estate and finance expert.
“Explore ways to monetize your hobbies, interests, or skills. Whether it's starting a blog, selling handmade crafts online, or offering consulting services in your area of expertise, turning your passion into a source of income can be both fulfilling and financially rewarding.”
4. Managing your money wisely
Commit to saving a portion of your income regularly, aiming for at least 20%.
Wise investment is another cornerstone of financial independence, with options including stocks, mutual funds, and retirement accounts.
Moreover, managing debt intelligently by avoiding high-interest liabilities and paying off existing debts swiftly is essential.
5. Planning for the future
Ensuring you have adequate insurance coverage, including health and potentially renters or life insurance, is an important aspect of future planning.
Starting early with retirement planning, even if it seems far off, can have a profound impact on your financial wellbeing in the later years.
Here’s a great article on how to improve financial literacy.
6. Embracing financial education
Knowledge is power, especially in the realm of personal finance. The landscape of financial products, investment opportunities, and economic trends is ever-evolving.
Commit to a habit of learning—read books, follow reputable financial blogs, or even take courses on personal finance management. This continuous learning journey will empower you to make informed decisions and stay ahead of the curve.
7. Seeking professional guidance
A financial advisor can offer personalized advice tailored to your unique circumstances and goals. Whether it’s navigating investments, tax planning, or retirement savings, professional guidance can be invaluable.
8. Maintaining financial discipline
Achieving financial independence requires ongoing discipline and commitment. Regularly reviewing and adjusting your financial plan, budget, savings, and investments as necessary is key.
Furthermore, staying informed about personal finance management, investment strategies, and financial planning is crucial for sustained independence.
You can also check these Top 3 Personal Finance Online Courses That Matter.
Check out the story of Dhanvin Sriram, who achieved financial independence by the age of 20.
“At 20, I became financially independent from my parents by taking charge of my finances. I started by building a solid credit history, making sure to pay bills on time, and using credit responsibly. This not only boosted my financial credibility but also opened up opportunities for better financial tools. Simultaneously, I explored various income streams, from part-time gigs to freelancing, which provided me with extra cash to save and invest. It wasn't an overnight success, but with budgeting, responsible credit use, and diversifying my income, I managed to stand on my own two financial feet.”
9. Reimburse your parents for leasing
Reimbursing your parents for leasing means taking responsibility to pay them back for any lease agreements they entered into on your behalf, such as leasing a car or an apartment. This act not only demonstrates financial responsibility and gratitude but also helps in building credit and financial independence by acknowledging and repaying debts owed to family.
Marom Anaky of Coinscipher shares this tip.
“It is time to start chipping in for rent and utilities, even if you're continuing to reside at home with your parents. Assume complete accountability for the state of your money and handle it independently. Your parents will have an easier time holding you responsible, in my humble opinion. When the time comes for you to venture out on your own, the parents are able to put the amount of money towards a savings account for you.” olor
If you wish to take this route, here’s another tip from Tracy Yu.
“Communicate openly with your parents: Be transparent about your financial goals and discuss expectations for shared expenses like rent or groceries.”
Frequently Asked Questions
What are the first steps towards financial independence for a recent college graduate?
Start by securing stable employment, creating a budget that includes savings and debt repayment, and setting up an emergency fund.
What financial habits should young adults develop to avoid debt?
Practice living within their means, avoid unnecessary credit card use, prioritize saving over spending, and educate themselves on managing finances responsibly.
Here’s what Jeff Mains has to share with those who wish to achieve financial independence.
“Embrace the habit of saving regularly, no matter how small the amount may seem, as it fosters discipline and builds financial resilience over time.”
Additionally, one should learn how to embrace frugality according to Seren Parry.
“Embrace frugality to build a robust financial foundation, allowing for a safety margin in your budget. Over time, as your financial stability strengthens, you can afford to gradually increase your discretionary spending, giving you the freedom to enjoy the fruits of your discipline and hard work without compromising your path to financial independence.”
How important is credit history for financial independence?
Very important; a good credit score can significantly impact one’s ability to secure loans for major purchases, such as a home or car, at favorable interest rates.
Here’s what Julia Mathers of Pasha Funding Expertise has to share.
“From my experience in the financial industry, the key to becoming financially independent from parents is to first establish a strong credit history. This can be achieved by opening a credit card and making timely payments, as well as taking out small loans and paying them off responsibly. Building good credit will not only allow you to qualify for loans and credit cards on your own, but it will also help you secure better interest rates and terms”
How can someone reduce expenses without significantly impacting their lifestyle?
Focus on cutting non-essential expenses, look for cost-effective alternatives for essential services, and practice mindful spending to ensure money is spent on truly valuable experiences and items.
Is it necessary to have a high-paying job to become financially independent?
Not necessarily; financial independence is more about how you manage your money—saving, investing wisely, and living within your means—than how much you earn.
Being financially literate should start as early as possible according to Roksolana. In fact, she encourages adults to teach children about it.
“Teaching children about budgeting, saving a portion of all money received—aiming for at least 20%—and the power of compound interest, has proven effective. Encouraging them to take on part-time jobs or internships not only builds work ethic but also introduces them to the responsibility of managing their own earnings. This approach has enabled my children to understand the value of money and the importance of saving and investing, paving their way toward financial independence from a young age.”
Key Takeaways
Achieving financial independence from parents begins with assessing your financial situation, setting clear financial goals, and building your income through both traditional employment and innovative streams like investing, freelancing, and digital entrepreneurship. Managing your money wisely, planning for the future, and continuously educating yourself on financial matters form the backbone of this journey.
Additionally, embracing professional guidance and maintaining financial discipline are crucial steps towards sustaining independence. This process not only prepares you for unexpected financial challenges but also empowers you to take control of your financial destiny.
By following the outlined steps, young adults can lay a strong foundation for their financial future. The journey is unique for everyone, but the principles of living within your means, investing wisely, and seeking professional advice when needed are universally beneficial. Let these tips inspire you to take action and embrace the journey toward financial autonomy with confidence and determination.
In addition to these foundational steps, leveraging resources like the Skill Success All Access Pass, which offers over 4,000 courses, can significantly enhance your journey towards financial independence and more.
Disclaimer: The information provided in this article is intended for general informational and educational purposes only. It is not intended to be and should not be interpreted as financial, legal, or any other type of professional advice. While the steps and tips mentioned are based on sound financial principles, every individual’s financial situation is unique. Thus, it might be necessary to consult with a professional financial advisor or planner to tailor advice and strategies to your specific circumstances. The author and publisher of this article assume no responsibility for any losses or damages resulting from the use of this information. Always do your own research and due diligence before making financial decisions.
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