Contributor: Kristen Fricks-Roman
Company: Morgan Stanley Wealth Management
Title: Financial Advisor
Given that we recently celebrated Independence Day, I have been thinking that we all could benefit from taking some time to reflect on the meaning of independence. Although July 4th is a celebration of our freedom as a nation, it also provides a backdrop to discuss the importance of ensuring our personal financial independence
Women face a particular set of challenges when it comes to achieving financial independence. Statistically, we have a higher chance of outliving our financial resources because we generally have a longer life expectancy than men. Women also tend to have more work-history gaps because we may have taken time off to take care of children or aging parents, for example, which leaves less time to build our savings. Generally speaking, women receive less pay than men do, leaving us with less income to save as well.
With these considerations in mind, it’s vital to plan strategically, put your hard-earned money to work and become the architect of your financial future. Here are some tips to get you thinking about what securing financial freedom looks like for you and how to achieve it.
Define your “why.” What financial independence looks like, and what motivates us to achieve it, is different for everyone. From a big-picture standpoint, financial independence usually means being able to rely on your own steady income, take control of your own finances and spend time doing what you want to do. At an individual level, that could include retiring early, pursuing your passions, or paying off student loans or credit card debt. It also means knowing what your financial goals are and actively implementing a feasible plan to achieve them.
Know what you’re dealing with. It’s essential to get a handle on your cash flow — how much is coming in and, specifically, where it’s being spent. Although some expenses may remain fixed over time, like a mortgage or car payment, others might fluctuate. Keeping track of variations in income and expenses, and maintaining an up-to-date budget, will provide the necessary clarity as you move toward financial independence.
Jumpstart your savings. Consider putting a percentage of each paycheck into your savings account. Saving a consistent amount each month not only adds up over time, but also enables you to expedite the saving process by taking advantage of compound interest. Developing good financial habits, building up emergency savings and using those savings to build wealth are all tactics women can employ to offset financial setbacks.
Save, specifically for retirement. It’s never too early or too late to begin saving via a 401(k) or other type of retirement account. As you receive bumps in pay at work, consider raising your contribution amount, especially if your employer offers matching funds. Also, remember to save for the lifestyle you want and the experiences you are looking forward to having throughout your lifetime.
Reduce debt. If you’re buried in debt, eliminating it should be a top priority. Not only will being debt-free help with your ability to put more money toward saving, but it can also lead to less anxiety about your finances.
As I often say, seek help from a financial advisor to help formulate your plan, or even a trusted friend who can help you remain accountable to achieving your financial goals. No matter how you choose to work it, just do it. Before long, you might find yourself hosting your very own financial Independence Day celebration.
Kristen Fricks-Roman CFP®, CRPS®, is a financial advisor and senior vice president at Morgan Stanley Wealth Management, Atlanta. She can be reached at [email protected].
The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney LLC and its Financial Advisors do not provide tax or legal advice. Individuals should seek advice based on their particular circumstances from an independent tax advisor. Morgan Stanley Smith Barney, LLC, member SIPC.