When Should I Become Financially Independent?

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Question: When Should I Become Financially Independent?

Recently I have heard many questions about people wondering if it is okay to accept a little bit of extra money from their parents after they graduate from college. These are not generally the people still living with their parents. Most of these people already have jobs, not great jobs, but decent jobs, but want to continue with a higher lifestyle or they may want to move to a more expensive place to live.

It is an important question to ask yourself.

What Is Financial Independence? 

There are two different definitions of financial independence. The first is becoming completely responsible for your own expenses. In this case, you are not longer relying on your parents for handouts. You are covering your daily expenses, planning for the future and you are able to meet your basic needs.

The second type of financial independence is the point where you no longer need to work in order to cover your daily expenses. Generally, this means that you have enough savings and investments that you can live off of the interest that comes from them. This is the ultimate goal for retirement. Once you reach this point, you really do not need to work and you can pursue the interests that are most important to you.

When Should I Become Financially Independent from My Parents?

Ideally, you should become financially independent from your parents as soon as possible.

This means that you are responsible for all of your personal expense and that you do not get a monthly stipend or check from mom or dad to help pay the bills. If you do this you can become dependent on your parents. It leads to sloppy money management and you can end up in a bad situation when they are no longer able to help you out.

If you are living at home, you need to make sure you are ready to move out, so that you do not need additional help.

How Do I Become Financially Independent from My Parents?

If you are having difficulty covering your monthly expenses then you have a serious income or spending problem that you need to address. It is important to consider what you can do to increase your income and change your money habits. If you situation is temporary, such as completing an internship or building a client list you should have a specific date after which you will be financially independent. It is important to establish these guidelines so that you are motivated to establish your financial independence.

Many people also wonder about whether or not it is acceptable to accept the occasional help from your parents. Some parents give their children the money for a down payment on their house. They may also help with car repairs or other big unexpected bills. It may not be clear whether or not you are financially independent if you accept this type of help. There are times when you should accept the gift, but it is important that it does not become a habit or that you consider your parents your emergency fund.

With planning and saving, you should be able to limit this type of help. 

You can prevent this from happening by establishing a good size emergency fund. This will prevent the emergencies from overwhelming your budget and make it easier to deal with a financial crisis. Another way that you can prevent this is by paying your parents back when you turn to them for help in an emergency situation. Financial independence will help you to build wealth because it helps you become aware of how you spend your money, it establishes good habits and teaches you to plan and save. It is also important to realize that you can break free from the way that your parents manage money and create a positive financial pattern.

When Should I Become Financially Independent?

The goal for complete financial independence is a big one.

The rate that you can reach this is entirely dependent on your own circumstances and goals. Generally, you need to be at this point by the time you retire. If you want to retire early, then you need to set specific goals that can help you reach this. If you make a lot of money each year, you will be able to reach this goal much more quickly than someone making just below minimum wage.

If this idea is appealing to you, you will need to start planning and making sacrifices to reach that goal now. It does not mean that you cannot do things and go on vacations, but it will take a focus in the way you handle your finances and how aggressive you are with your savings. 

How Do I Become Financially Independent? 

There are steps that you need to take in order to become financially. You will need to develop a solid financial plan, and you need to be comfortable investing. Talking to financial planner can help you follow the steps you need to take to reach this point.

  1. First, you need to determine just how much money you will need to be financially independent. It helps to have a clear goal of what you want to live off each month and then you can determine how much you need to have investments so that you will receive the payouts in that amount.
  2. This means that you are on a budget and saving and investing your money each month. You should be out of debt. the more you can save, the more quickly you can reach your goal. It may mean making real sacrifices in your lifestyle so that you can reach your goals more quickly. You may forgo vacations, eating out each night and new clothes each month to reach these goals. 
  3. Start investing in a variety of different stocks and mutual funds. It is important to remember that you are investing for the long-term so that you do not panic when the market goes up or down. finding a good financial planner can help guide you through this and eventually choose the investments that can generate income for you to live on each month. 

The habits you start now will follow you into the future. It is important to start living within your means as quickly as possible. Your parents will not always be able to help you out, especially as they start to retire. They may need additional help from you occasionally. Take the steps now to manage your money so that you can return the favor in the future