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While the idea of financial freedom can mean different things to different people, a recent Bank of America report highlighted the top three areas many women say indicate financial independence.
To obtain the results, more than 3,500 women aged 22 and over were asked about their thoughts on financial confidence, particularly when it comes to investing.
Here’s a look at the top three indicators of financial independence according to survey respondents, along with a few simple tips to help you achieve those goals.
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be debt free
First of all, 47% of respondents agreed Being debt free was a great indicator of financial independence.
While some forms of debt — like a mortgage or student loan — can give you the flexibility to afford an opportunity or purchase an asset, for many, the idea of actually owing money is enough to create a sense of anxiety . Many people are emotionally uncomfortable with debt, and those feelings of unease are reason enough to prioritize the disappearance of their balances.
Paying off debt allows you a little more flexibility, even in the face of tough circumstances. For example, if your credit card limit is $5,000 and you have a balance of $4,500, you’ll only have $500 left to cover the cost of an unexpected car repair or roof leak if you don’t have an emergency fund out that you can draw. However, if you were to pay off that balance, you would still have more leeway to cover necessary expenses should your emergency fund run out.
There are many strategies when it comes to paying off debt. The popular debt snowball method eliminates the smallest balance of debt first, while only paying the minimum on your other debts. The idea is to work your way up to the largest bankroll until you are completely debt free.
Another tactic, the debt avalanche method, is to first eliminate your highest-interest debt while making minimal payments on the others, and then work your way down to the lowest-interest debt. This particular method will help you save the most in interest expenses.
Debt consolidation is another strategy that can potentially help you save on interest costs while organizing your debt into just one monthly payment. With this option, you are essentially using a debt consolidation loan, such as a B. the Marcus by Goldman Sachs staff loan or the LightStream staff loan to send your funds to each of your creditors to settle those balances. After that, all you have to do is pay back the debt consolidation loan you took out.
Another alternative is to use a balance transfer card with an introductory period of 0% APR, such as % variable thereafter; all transfers must be completed within first 4 months) or Chase Freedom Unlimited®, which has an introductory 0% APR for 15 months from account opening on balance transfers, then a variable APR of 15.74% – 24.49%, Transfer a high-interest rate credit card balance to a new credit card that doesn’t charge interest for a limited time. The idea is that the 0% introductory APR period gives you enough time for your entire monthly payment to go toward the balance and not interest, which should help you pay off your debt faster.
Being able to cope with an unexpected expense
Emergencies are bound to happen, which is why 39% of the women who took part in the survey said being able to face unexpected expenses is a sign of financial independence.
With a An emergency fund — a sum of money you can access in an emergency — can help offset these unforeseen expenses. For example, you could use money from an emergency fund to replace a damaged car part, fix a leaking roof, or pay for a medical bill you didn’t plan to use.
Emergency funds can also help you make ends meet if you are fired from a job at short notice or without notice. While unemployment benefits can help you fund some of your daily expenses, these funds are generally not enough to cover all of your living expenses.
It’s a good idea to keep your emergency fund in an account that is relatively easy to access, such as a B. Marcus by Goldman Sachs High Yield Online Savings or an Ally Online Savings Account. With these high-yield savings accounts, you’ll earn monthly interest just for holding a balance, allowing your emergency fund to grow a little faster.
Experts usually recommend that you have an emergency fund with about three to six months of living expenses, although the amount you should save depends on your individual situation and what your monthly expenses typically are.
Being able to take care of themselves without financial help from the family
According to the survey, 34% of respondents said they would feel more financially independent if they didn’t have to ask their families for financial support.
That Rising costs of living, student loans, and stagnant wages make it difficult for many people to keep up with daily expenses — sometimes leaving them no choice but to turn to family to bridge the gap between what they need and what they in fact can afford to close.
While it’s usually recommended to simply find ways to cut spending to free up the money for other spending, in a highly inflationary environment like the one we’re living through, there may not be much room for individuals to save more spend than they already are.
If you find your cash flow is hitting a wall, it might be time to ask for a raise at work or even move to a better-paying job if you can. If you’d rather stay with your current company, try taking a part-time job—preferably one you find really comfortable—to make ends meet.
When deciding on the side job, think about your skills and personal interests and try to find a side job that suits you best. For example, if you have a knack for creating custom digital illustrations, consider selling them through a site like Etsy.
While extra work can be tiring, there are a few things you can try to help alleviate burnout. For one thing, avoid side jobs that force you to use the same skills you use in your day-to-day work. For example, if you’re already a full-time writer, taking on an extra part-time job as a freelance writer can feel like sheer writing overload. Consider using another skill you already have that you can monetize so you don’t have to do too much of the same thing every day.
You should also think about how much time you realistically need to devote to side hustles each week. If you can only spare 15 hours a week, you’ll get stressed and burned out very quickly when you’re doing a part-time job that’s going to feel like just another full-time job.
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Editorial note: Any opinion, analysis, review, or recommendation expressed in this article is solely that of Select’s editorial team and has not been reviewed, approved, or otherwise endorsed by any third party.