Becoming Financially Independent
Wednesday, July 9, 2014
It’s tough when you’re financially dependent on someone else. Even (or perhaps especially) as a young person starting to enter into the real world, it can sometimes chafe to need your parents to chip in for your bills or rent.
Sometimes, it’s hard to avoid. As a younger man, I struggled with an illness that made it very difficult to achieve financial independence. But, even if you’re struggling, you can still try out a few strategies to help you stand on your own two feet and independent from your parents.
I’ve laid these out in a step-by-step order to make things easier – but it’s important to remember that these are all just suggestions. Some will help you; some might not work for your situation. Think of them as a starting point to help you find your own way towards becoming financially independent.
See a Doctor
Previously on Insight, I’ve discussed how your physical health can actually have a genuine impact on your saving and spending habits. To recap: your physical wellbeing affects your psychological wellbeing and, when you’re not feeling 100% psychologically, you spend more.
So, when you’re starting to really look into becoming financially independent, it’s best to start with a visit to the doctor. It’s best to check on your mental health in an appointment with a GP as well. It’s currently believed that 6-7% of Australians aged between 16-24 experience depression in any given year and untreated depression can have a massive impact on your ability to manage your money.
(In addition to screwing with your motivation and discipline, studies have actually shown that you’re willing to spend a lot more money on things when you’re sad.)
What do you have already? What is it worth? You should make note of how much money you have, what possessions you have and what each of those possession is worth.
This has two benefits. Firstly, if you’re planning on becoming financially independent and moving out, you’ll want to know exactly what you’ve got to take with you and what you need to get ahold of before you move.
Secondly, it’ll give you an insight into your actual savings. You could only have $200 in your account – but you could have an old laptop or some useless furniture which you can sell to bolster your savings when/if you need. It’s important to know.
Get a Job/Income
It’s obvious that securing an income will be a big part of becoming financially independent. Unfortunately, it might also be one of the hardest parts of becoming financially independent. Youth unemployment currently accounts for roughly 40% of total unemployment in Australia and that percentage would appear to be growing bigger.
That’s not meant to discourage you. It’s simply to impress upon you that finding a job will be difficult and that you may need to work a little bit harder to find employment. Don’t just submit a resume online – stop in at the places you’d like to work and make yourself known. Follow up on applications with phone calls. Think laterally.
It’s also to impress upon you that there is no shame in going to somewhere like Centrelink when you are unemployed. While it’s looking like that process might grow more difficult in months to come, it’s important to remember that, for now, that Centrelink exists to help you become financially independent and help find you a job.
Going on Centrelink doesn’t mean you’re being lazy. It means you’re using all of your resources to find yourself a job. And, when 1 in 3 unemployed Australians is aged between 16-24, there’s no shame in needing help to find a job as a young person.
Create a Budget
Once you’ve secured an income, you should focus on developing a budget. A budget will help you make the most of what you’re earning and help you figure out how much money you can save in a week. This will be instrumental in planning for things like moving out and saving for a car.
If you’ve never created a budget before, we’ve previously published a step-by-step breakdown as to how to go about setting one up for the first time. Alternatively, you can try an app like Pocketbook, which largely automates the process.
Get a Second Savings Account and Set Up Regular Direct Debits
One of the smartest things I did when I graduated was set up a separate high-interest account for my savings with a direct debit transfer. Each week when I got paid, my bank would automatically transfer fifty dollars from my normal bank account to a separate bank account with a higher interest rate. When I moved to the city a year later and had trouble finding a job, I already had four grand to help me through the rough times because of that account. I still use it today.
So with that, you should be well on your way to becoming financially independent and standing on your own two feet. Congratulations and good luck!