With summer over, many recent grads are in the midst of their first jobs. If you fall into that category, it's a good time to take stock of your financial situation. But it's not all budgets and balancing checkbooks. Financial independence is about setting yourself up to live the life you want. Take a moment to reflect on your life and your goals. Are you set up to achieve those lofty ambitions?
Here are five steps toward your financial independence:
1. Don't be intimidated--take ownership of your financial life. Personal finance is just like personal fitness--the basics are accessible to everyone, and you owe it to yourself to understand the governing principles. If you get the basics nailed, then it may be time to call in the experts, but get the basics down first. Maximize savings and minimize expenses, especially on fixed costs like rent and debt repayment.
2. Assess your current situation. How much money do you make? How much are you spending? How much do you spend on needs (loan payments, rent) vs. wants (another round at the bar, the latest shoes or electronics)? If you have a significant amount of debt, be it student loans or credit-card debt, it is important to be honest with yourself about how much you owe. List out your creditors and what you owe to each one. Review your loan documentation or credit card agreement to understand your minimum payment obligations. Figure out a) how long it will take you to be debt free, and b) how much interest you will have paid over that period.
3. Be specific in articulating your goals. Do you want to rent or own a house? Are you planning to go to law school? Are you saving at a reasonable rate to attain those goals? Think about what changes you need to make to your lifestyle to achieve those goals. You need to be able to say to yourself, "If I want a house by 35, I need to save $100 every week." Then ask, "Can I do it faster?"
4. Measure your performance. You can't manage what you don't measure. You say you want to spend less when you look at your credit-card bill, but then a month goes by and you look at the next bill, and you're still spending 20 percent of your income going out. Be honest with yourself and your goals. There are a number of websites and mobile apps that will track your spending for you, and send you an email alert if you are spending in a manner inconsistent with your budget. Find an accountability partner--that person in your life who won't let you off the hook, and who will remind you of your goals.
5. Adjust/automate your behavior to achieve your goals. Having enough willpower to resist that Mocha Frappuccino each day is tough. So why not automate your savings goals instead? Direct deposit a part of your savings each pay period into a retirement or emergency savings account. Use your measurement tools to assess how well you're tracking against your goals. Be honest with yourself: If you really need the $200 gym membership, then make adjustments in other parts of your life to accommodate that priority. The hardest part of financial independence is articulating the tradeoffs you need to make. Be explicit about the tradeoffs, and keep your goals in mind.
Shiyan Koh is the VP of Personal Financial Management for NerdWallet, a personal finance website dedicated to bringing unbiased advice on credit cards, checking accounts, and personal financial planning.
More From US News & World Report