Redefining What Financial Independence Means to A New Generation

“Will I Ever Get There?”

For many in younger generations, financial independence can feel more like a distant dream than an achievable goal. With the rising cost of living, student loan debt and ongoing economic uncertainty, it’s easy to feel discouraged.

But financial independence is possible – not through a single leap, but by taking steady, intentional steps to reach your personal financial goals. Understanding the path forward and knowing which step to take next can make all the difference in turning the dream of financial independence into reality.

Tailor Your Action to Your Stage of Life

Depending on where you are in your life and finances, such as starting out or settling down, the next step for you might look very different from someone else’s. The hierarchy of financial needs can be a helpful framework for determining the most important steps to take now.

• Cashflow and Basic Needs

At this level, your immediate goal is to ensure that your income exceeds your expenses. This might involve budgeting more effectively, cutting unnecessary costs or considering career moves that could help boost your income potential.

• Financial Safety

Once you've stabilized your cash flow, the next step is to safeguard your future financial independence. Start by paying off high-interest debt, such as your credit card debt or high-interest consumer loans. Small steps paying down debts will bring you closer to your goal of financial independence.

Build a basic emergency fund (aim for 1–3 months of expenses to start) and save it in a secure, accessible place such as a savings account. You can fund it with part of your monthly income or with windfalls, like tax refunds or bonuses.

Additionally, evaluate and update your insurance coverage, such as life insurance and disability income insurance, to protect yourself from unforeseen surprises and costs.

• Wealth Accumulation

After you pay off your high-interest debt and have a sufficient emergency fund (at least 3 months’ worth of your living expenses) saved, your priority will shift to long-term wealth building.

Contribute to retirement accounts like 401(k) or IRA and consider investing in brokerage accounts. Small, consistent contributions can go a long way. Aim to start by maximizing employer matching in your 401(k) plan and gradually increase your savings until you achieve 15-20% of savings rate (savings/pre-tax income).

• Financial Independence and Legacy

Finally, when you achieve financial independence, it's a great time to shift your focus to what lasting impact your legacy can make. This could involve setting up college funds for your children or grandchildren, contributing to charities, or even establishing a foundation

The framework helps you prioritize what to focus on, but it’s not all-or-nothing. You can save for retirement while paying off high-interest debt or fund your child’s education while building toward your financial independence. It’s about knowing what to tackle first, not what to do exclusively.

Financial Independence, One Step at a Time

Financial independence can seem intimidating in the new era, but it isn’t out of reach. It takes time, but every smart step brings you closer. A CFP® professional can be a guide for you and help you prioritize on what you should be focusing on now, to help build the future you want.