Claim Financial Independence All Year Long

By Kara McGuire

RISMEDIA, With your Fourth of July cookout and fireworks watching over, why not take some time to reclaim your financial freedom?

Nagging money issues can put a chokehold on our lives. And in the weekly hustle, it can be hard to carve out time to tackle our financial to-do list. Granted, many money-related matters that can increase your financial independence—think increasing income or getting out of debt—take a lot longer than a day. But you have to start somewhere. Devote a couple of hours in the hammock with your laptop and you’d be surprised at how much you can accomplish. Here are a handful of ideas:

Start with Your Future: Are you saving for retirement? I hope the answer is yes, especially if your company offers free matching money when you save a certain amount. Have you looked at your 401(k) or IRA performance lately? Take a look. The second quarter wasn’t so hot, but I’d bet your nest egg looks golden compared with where it was two years ago.

Teach Your Kids: Put down the sparklers, kids, and come on over for a money lesson. Just kidding; I know how well that would go over. But it’s our job as parents to teach our children the financial basics, just as it is to educate them about basic hygiene and cooking spaghetti.

My suggestion? Talk about money as part of daily family life. Explain credit cards when you’re at the grocery store, and start a conversation about wants and needs when you say no to a new Lego set.

As kids get older, it’s our responsibility to teach them how to manage finances as an adult. In addition to opening up a checking account and explaining a debit card, I plan to add my kids as authorized users on my credit card when they are teens. The backlash against credit has many families advising their kids to avoid credit altogether. I think it’s a wiser strategy to teach teens how to properly manage credit, which will help them build a solid credit history.

Free Yourself From Debt: When I talk to people who toiled to become debt-free, they usually tell me that it feels as if

a weight has been lifted off of their shoulders once the last bill is paid. Wouldn’t that be nice?

To start, add up your debt. Does the amount make you sweat? If so, it might be worth talking to a debt expert at a nonprofit credit counseling agency. If you think you can handle it on your own, decide between the following two methods: Work to pay down your smallest credit card balance first, or work to pay off the card with the highest interest rate first. The argument for the first strategy is that watching a credit card get paid off will motivate you to keep paying down your debt. Plus it reduces one bill you need to keep track of. The argument for the second method is that you will end up paying less in interest. Either way, try to pay more than the minimum payment each month. If you can’t afford to, consider seeing a debt counselor.

Avoid the Shackles of Major Expense: It’s fun to dream about owning a nicer, bigger house in a better neighborhood. But consider what it means for your long-term financial security. While mortgage calculators say we can afford to trade up, and I’m constantly debating the pros and cons, I’m not ready to give up our keep-expenses-low philosophy. Low costs act as a hedge against life’s financial uncertainties—job loss, illness, and major repair bills. I’m not saying to live life without splurges. But there’s a certain amount of freedom that comes from knowing you can dodge a financial curveball.

Become A Financial Independent: I can’t tell you how many times I’ve talked to financial advisers who tell me stories about women who don’t know the first thing about their retirement savings or estate plan, or who never thought about money until divorce made it a necessity. Last week, a Fidelity study revealed only one-third of wives would be comfortable assuming financial responsibility if circumstances required them to do so, compared with nearly three-quarters of husbands. Make room in that hammock for your spouse and have a money talk. Make a point to have regular discussions about your finances.

(c) 2011, The Kansas City Star.