Select’s editorial team works independently to review financial products and write articles that we think our readers will find useful. We earn commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.
While the idea of financial freedom can mean different things to different people, a recent report from Bank of America identified the top three areas that many women believe indicate financial independence.
To get 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 an overview of the top three indicators of financial independence, according to survey respondents, along with some simple tips to help you achieve those goals.
Subscribe to the Select newsletter!
Our top picks delivered to your inbox. Shopping recommendations that help you improve your life, delivered weekly. Register here.
Be debt free
To begin with, 47% of respondents felt that being debt-free was a huge indicator of financial independence.
While some forms of debt – like a mortgage or a student loan – can give you the flexibility of being able to afford an opportunity or acquire an asset, for many the thought of owing money is enough to create a feeling of terror. Many people are emotionally uncomfortable with debt, and those feelings of discomfort are reason enough to prioritize having their balances wiped out.
Paying off debt also allows you a bit more flexibility in the face of difficult circumstances. For example, if your credit card limit was $5,000 and you had a balance of $4,500, you would only have $500 left to cover the cost of an unexpected car repair or leak. roof if you didn’t have an emergency fund to draw on. If, however, you were to pay off that balance, you would have even more room to cover a necessary expense if your emergency fund was insufficient.
There are many strategies for paying off debt. The popular snowball method is to eliminate the smallest debt balance first while only paying the minimum on your other debts. The idea is to work your way up to the highest balance until you are completely debt free.
Another tactic, the debt avalanche method, is to eliminate your highest interest debt first while making minimum payments on the others, and work your way up to the debt with the rate of lowest interest. This particular method will help you save the most on interest charges.
Debt consolidation is another strategy that can potentially help you save on interest charges while organizing your debt into one monthly payment. With this option, you essentially use a debt consolidation loan, such as the Marcus by Goldman Sachs personal loan or the LightStream personal loan, to send your funds to each of your creditors to pay off those balances. After this point, all you have to do is repay the debt consolidation loan you took out.
Another alternative is to use a balance transfer card with a 0% introductory APR period, such as the Citi® Diamond Preferred® Card which has a 0% introductory APR on balance transfers for 21 months from the date of the first transfer, (15.24% – 25.24% variable thereafter; all transfers must be made within the first 4 months) or the Chase Freedom Unlimited®, which has an introductory APR of 0% for 15 months from account opening on balance transfers, then a variable APR of 15.74% – 24.49%, to transfer the balance of a credit card with a rate of high interest on a new credit card with no interest charges for a limited time. The idea is that the 0% APR introductory period will buy you enough time for your entire monthly payment to go towards the balance and not interest, which should help you pay off your debt faster.
Be able to bear an unexpected expense
Emergencies are inevitable, which is why 39% of women who responded to the survey said that being able to cope with an unexpected expense was a sign of financial independence.
Have a an emergency fund — a lump sum of cash you can access in times of emergency — can help offset these unexpected expenses. For example, you can use money stashed in an emergency fund to replace a damaged car part, fix a leaky roof, or pay for a medical bill you didn’t plan for.
Emergency funds can also help you make ends meet if you are laid off without notice. Although unemployment benefits can help pay for some of your day-to-day expenses, these funds are usually not enough to cover your entire cost of living.
It’s a good idea to keep your emergency fund in a relatively accessible account, like Marcus by Goldman Sachs High Yield Online Savings or an Ally Online Savings Account. With these high-yield savings accounts, you’ll receive monthly interest just for maintaining a balance, which will help your emergency fund grow a little faster.
Experts generally recommend that you have an emergency fund with around three to six months of living expenses, although the amount you should save depends on your personal situation and the amount of your monthly expenses.
Be able to support themselves without financial support from family
According to the survey, 34% of respondents said that not having to ask their family for financial help would make them more financially independent.
The the rising cost of living, student debt and stagnating wages have made it difficult for many people to meet day-to-day expenses – sometimes they have no choice but to turn to their families for help bridge the gap between what they need and what they can really afford.
While it’s generally recommended to simply find ways to cut expenses to free up money for other expenses, with a highly inflationary environment like the one we’re experiencing right now, there may not be not a lot of room for individuals to reduce their spending. spend more than they already do.
If you find yourself hitting a wall with your cash flow, it might be time to consider asking for a raise at work or even moving to a better paying job if you can. If you’d rather stick with your current business, try taking on a side hustle — preferably one you find actually enjoyable — to help you make ends meet.
If you choose to go the side hustle route, think about your personal skills and interests and try to find a side gig that works best for you. For example, if you have a knack for creating custom digital artwork, consider selling it through a website like Etsy.
Although it can be tiring to take on additional tasks, there are things you can try to alleviate burnout. For one thing, avoid doing side gigs that require you to use the same skills you use for your day job. If you’re already working full-time as a writer, for example, taking on extra work as a freelance writer can feel like complete writing overload. Consider using another skill you already have that you can monetize so you don’t get stuck doing too much of the same thing every day.
You should also think about how much time you realistically need to devote to a side activity each week. If you can only spare 15 hours a week, you will become stressed and burnt out very quickly if you pursue a side job that feels like another full-time job.
Check out Select’s in-depth coverage at personal finance, technology and tools, The well-being and more, and follow us on Facebook, instagram and Twitter to stay up to date.
Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.