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Just Starting Out? Take These Seven Steps Toward Financial Independence.

Key Points
  • Young people are asking if there are steps they can take now to create financial security. The answer is "yes."

  • Being on top of what you spend and save, preparing for the unexpected, and planning now for retirement are key to creating a solid financial base.

  • Your responsibilities and priorities may change over time, but taking these steps when just starting out will put you on track to achieve lasting financial independence. 

Dear Readers,

A few weeks ago I reached out on social media to ask recent grads about their top money concerns. Not surprisingly, creating financial security—specifically saving for the future—was a common theme. They also wanted to know what financial steps they could take immediately to get on the right track.

So with the 4 th of July just around the corner, it’s the perfect time to bring out some tried and true steps everyone should take to not only declare their financial independence—but to actually achieve it. You may have heard them before, but they bear repeating, both as a call to action to young people and a reminder to anyone at any age who wants to take financial control.

Seven steps to financial independence

1.  Don't spend more than you earn. That may sound obvious, but it takes some conscious effort. You need to strike a balance between what you absolutely need to spend money on and the nice-to-haves. The best way to do this is to create a budget listing essential expenses like housing, utilities, food, transportation, insurance, and debt payments in one column and extras such as entertainment, dining out and vacations in another. Ideally, you want to be able to cover the essentials, choose a few extras, and still sock away some savings.

2.  Make saving a mindset. For some people, saving comes naturally. For others, you almost have to trick yourself into doing it. So think of it as paying yourself first. To make it easier—and more rewarding—come up with a few goals, both short- and long-term. Carve out a monthly amount to put toward those goals. In fact, why not make savings part of your essential expenses? Better yet, put your savings on automatic with a monthly deposit from checking to savings. Whatever it takes, make it a habit. When you achieve your goals, you'll feel great and perhaps even more motivated to keep saving. You may have to make tradeoffs to do it, but that's the price of independence.

3.  Create a rainy-day fund. Continuing the theme from point two, carve out a portion of your budget while you're working and aim to have cash to cover three-to-six months essential expenses easily accessible. Why? Just think what would happen if you lost your job or had a long illness. How would you pay your bills? That's why a rainy-day fund is so important. In fact, save this money in a separate account and promise yourself to leave it there unless there's an emergency.

4.  Control debt—don't let it control you. Credit cards can feel so freeing—but they can also lock you into spiraling and expensive debt. It's fine to use credit cards for convenience, as long as you don't charge more than you can really afford (and can pay off every month). In addition, if you have student debt (another top priority for those who responded), stay on top of your loans. Consolidate if it makes sense, review your repayment options, and never, ever miss a payment.

5.  Get insured. You've heard it before, and you might have resisted it, but please make sure you have health insurance. Whether through work or an individual policy, at least have enough insurance to cover any catastrophic health event. (And if you’re 26 or younger, you might be able be included on a parent’s policy, at least for now.) Of course, if you have a car you need automobile insurance. Renting? Look into a low cost renters’ policy. Part of being independent is being prepared.

6.  Think retirement starting now. I'm always tempted to put this at the top of the list because it's so important, but when just starting out I think the other points should probably be handled first—or at least simultaneously. But get started as soon as you can. If your employer offers a 401(k)—or ideally a Roth 401(k)—aim to save between 12-15 percent of your gross salary between what you and your employer are contributing (or at the very least contribute enough to get the full company match). If not, open a Roth IRA. A Roth is a good choice for a young person because, while you don’t get the tax advantage up front, withdrawals are tax-free after age 59½ when you’ll likely be in a higher tax bracket.

7.  Invest, invest, invest. Saving is one thing, investing is another and I encourage you to start investing as soon as you've built up your rainy day fund. It often doesn't take a lot of money to establish an account, especially a retirement account. First, explore  investing information  online, thinking about your investment goals. Depending on how active you want to be, you also might want to consider a robo advice service. If you are still unsure, sit down with a financial consultant who can start you on the right track.

There's more of course. As your goals grow and change, your financial focus will invariably change and you'll have new responsibilities and new priorities. However, if you take these seven steps now—and be continuously mindful about the way you spend and save—you'll not only give yourself a good start, you'll be on your way to lasting financial independence. Happy 4th of July!

Have a personal finance question? Email us at . Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries,  contact  Schwab.

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Important Disclosures

Investing involves risk including loss of principal.



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