Precisely 247 years ago, a bunch of ragtag colonists declared their independence from the tyranny of a monarchy across the sea. On July 4, we acknowledge their courage with celebrations all across America.
Many people enjoy fireworks displays. Others hit the beach, host a barbecue or simply relax and reflect on how lucky they are to live in such a great nation.
But if you are deeply in debt — or simply on shaky financial ground — you can use the spirit of the holiday as motivation to break free of another type of tyranny: the prison of bad financial decisions.
Following are some changes you can make that will help put you on the path to financial independence.
1. Stop spending and start saving
American households owe nearly $1 trillion in credit card debt, according to the Federal Reserve.
Some of us simply lack the discipline to save. Others have meager salaries and turn to borrowing to make ends meet.
No matter how you got there, it’s time to add it all up and confront it — there’s no advantage to remaining in denial.
Just as our forefathers had the courage to imagine a nation of liberty long before it materialized, you need to believe you can climb and conquer your own personal mountain of debt. Starting this July 4, commit to paying down your debt a little at a time with every paycheck. Learn “How to Pay Off $10,000 in Debt Without Breaking a Sweat.”
If it feels impossible because you’re always scraping by, you’re not alone. But remember Americans made it through the Great Depression, and you’ll make it through this.
2. Don’t be afraid to invest in stocks
Just over 3 in 5 Americans — 61% — invest in stocks, according to Gallup. While that number may sound decent, it means millions are missing out on what may be their best chance at building substantial wealth.
Yes, investing in stocks can be scary. But historically, the stock market has been the best place to build the type of wealth you will need to enjoy a sound financial future and retirement.
Ready to take the plunge? Check out:
3. Work to improve your credit score
Your credit score has a huge impact on the rate you will pay on loans for cars, homes and other purchases. The better your score, the lower your payments will be.
And remember, those payments can last for years. So, a bad credit score today can impact your finances for many tomorrows.
Improving your score should be a top priority. Fortunately, we have some tips to help you out.
4. Shore up your safety nets
Surveys consistently show that the average American has very little money saved up for an emergency.
But that can be a huge mistake, and a major savings drain. Not only does an emergency fund keep you from having to put emergency expenses on a high-interest credit card, but it also can save you money in other ways — such as cutting the cost of your insurance by allowing you to raise your deductibles.
Among your goals should be setting aside enough cash in savings to cover your insurance deductible (high or low) if you have a sudden claim.
Does it seem like money is too tight to build up an emergency fund? Again, we can help.
5. Celebrate your financial independence — but not quite yet
If all of this talk of scrimping and saving threatens to turn your fireworks into a fizzle, remember that your goal is financial independence. America struggled hard for its own independence, but the payoff has been more than 200 years of freedom and prosperity.
Eventually — after you eliminate your debt, and save and invest wisely for many years — you will be able to enjoy the fruits of your labors. But for now, it is time to heed the words of one of the Founding Fathers, Benjamin Franklin, who said: “A penny saved is a penny earned.”