For many years, many people thought of financial independence as something that's far out in the future. But if you ask young adults today, the majority will say that it's one crucial part of adulting.

Let's be real. Adulting is not easy. Sure, you get to live the life you've always wanted, break-free from home, parents, or nosy relatives, and do your own thing without help from them. However, it can be way too overwhelming and, at the same time, may lead to financial struggles.

But don't worry. Here at The Finance Boost, we will share the 7 Habits of Financial-Savvy People Who Want To Achieve Financial Independence with you.

Ultimately, if you want to be financially independent, then the best time to cultivate these habits is today.

Further reading: SMART Financial Goals To Live By For 2021

What does it mean to be financially independent?

Becoming financially independent and enjoying financial freedom is one of the essential things in life. Typically, most people have different perceptions of what being a financially independent individual is.

In simple words, being financially independent means you can support your financial needs without needing help or support from anyone else. If you can live the lifestyle you desire and have enough or more than enough money for daily living, you live financially free.

Of course, becoming financially independent cannot be attained overnight. It will take a clear plan, a lot of patience, grit, and time, depending on your current situation, to achieve it.

For instance, adult children will be “on their own” when they no longer need money from their parents. In this survey, most say young adults should be financially independent by age 22. But we all know this isn't the case for all.

On the other hand, when you have sufficient income to meet all of your needs and the lifestyle you want without having ever to work again, you’re no longer dependent on your employer.

How do you know if you are financially independent?

There is no single indicator that fits all. Whether you are already living a life of financial independence or not, some signs can tell.

For example, if you can buy three sets or pairs of the item you see in the mall without anxiety about the price tag, well, that's a good sign.

Another one is spending less than you earn, therefore giving way for you to have the cash to set aside for savings and the future.

If you have a financial plan that's working out for real, where you can save enough money, sleep well at night without worrying about money, and have your money work for you, then congratulations! You're either already financially independent or on the right path to financial independence

Why is being financially independent important?

Many Americans struggle to balance their books properly, no matter how much money they make. In this research, 75% of early adults say that becoming financially independent from parents is the key indicator of being an adult.

Don't get me wrong. It is okay to still get financial support from your parents. It's just that in this day and age, being financially independent is one mark of adulthood in some cultures and societies.

And there's no perfect time other than today and now to start living financially independent.

As the Chinese proverb says,

“the best time to plant a tree was 20 years ago. The next best time is today.”

It's terrific to start young, and even if you've seen many calendar years, it is not too late to start.

This means that you know what your priorities are, and one of them is becoming “financially independent and retiring early” — or “FIRE.”

Joining the FIRE movement can bring a lot more good in your future, and it goes to say that you work to live, not live to work. And by starting as early as now, you are deciding to stand on your feet and have an abundance in retirement.

It may seem too distant but, if you take one small step today, your future self will thank you tomorrow.

How do you achieve financial independence?

Well, first you have to gain knowledge about it and try to apply it to your life. Numerous books offer wisdom, and blogs such as these to give you a clear mental picture of what your financial life should look like.

With the vast materials and resources floating on the internet, it's straightforward to leap.

However, financial independence should not be your end goal. It should be a path to financial freedom and building wealth.

Another way to get financial independence is, of course, having a sufficient income source. Incomes can come in various ways, so long as you're earning real cash, whether from your salary or business, it is your ticket to financial independence.

Aside from that, a few tweaks on your lifestyle and incorporating new systems or habits can also help you gain this financial reward.

Related Reads: Who Needs Financial Literacy? Ultimate Guide To Personal Finance 2021

7 Habits To Achieve Financial Independence

In his book Atomic Habits, James Clear provided practical tips on implementing a better system and explaining in well-written and short words how habits are like the atoms of our lives: tiny but offering remarkable results.

I have picked up a few good points about how we should form good system habits through habits stacking, making it obvious, easy, satisfying, and rewarding. You can apply these insights both in businesses and practical lives.

Others say that habits are constraints and for nerds, but I don't see it this way.

Without sound financial habits, a person will be most likely struggle.

So, today is the day for you to fix your habits and start sticking to them this year. The following are effective habits everyone should incorporate in their lifestyles to gain financial independence at any age and at any time.

Habit #1- Minimize Expenses

To gain financial freedom and independence, you must spend less than you earn and free up cash in your budget. Always keep your expenses under control; otherwise, they will eat up your income.

What are some critical areas you may reduce expenses, you might ask? Remember to start small. Go over and review your expenses and see where you can cut spending.

Further reading: Budgeting Tips for Young Adults: How To Be The Master Of Your Finances

Habit #2- Avoid Lifestyle Inflation

If you were someone living paycheck to paycheck before and now leveled-up somehow and are earning more than you were, there's usually an urge to spend more and need stuff. You see, my friend, that is one principle that separates the rich from the poor.

Don't you know that millionaires on the planet wear casual tees, eat at McDonald's, and throw a simple party just like the rest of us?

Why do you need to switch coffee brands just because your salary increased by a few digits? Let me leave you with this classic quote, “penny wise, pound foolish.”

Avoid this mistake, and make sure to make a few financial lifestyle changes only when you know you deserve it rather than trying to live with expectations and external validations.

Stop this bad habit right now, and learn how to keep yourself grounded.

Further reading: How To Live Below Your Means: Frugal Living Tips To Save More Money

Habit #3- Grow Your Money

A financially independent individual spend less than they make and invests the difference. Make use of tax-advantaged accounts. Start investing early.

Learn how to multiply your money and not just let it sit in your bank account doing nothing. Sure it's good to save, but it's better to invest. Besides, your money in the bank faces potential threats in case of inflation.

Therefore, open an account with a brokerage now, do your research, invest extra money so that you won't just rely on your income in the future.

Read more:
How to Start Investing Your Money Like a Pro – The beginner’s guide
36 Best Ideas to Earn Extra Money Now and in the Future.

Habit #4- Keep Learning

My mantra in life is to become a student for life. Never get tired of acquiring knowledge. Constant learning will take you places.

If you keep on learning, you will become self-reliant. And that's being independent too!

Take advantage of your brokerage educational tools and talk to your financial advisor if you need help. That way, you will become confident to make sound decisions.

Habit #5- Cultivate An Abundance and Fearless Money Mindset

Remember, everything starts with your mindset. Shift your perspectives, attract, and manifest the good. Money is good, especially if you know your way around it.

You must have a mental grit and growth mindset to start your financial independence journey with clarity and a clean slate. Let becoming broke not scare you. Instead, let it open more opportunities for you.

Moreover, financial independence involves diligence and a bit of sacrifice, but even the smallest moves can yield significant outcomes.

Habit #6- Build More Assets than Liabilities

This one is what I picked up from the book: Rich Dad, Poor Dad by Robert Kiyosaki. Essentially, building or acquiring assets more than liabilities will allow you to generate more steady cash flow. So the next time you think of purchasing a large item, say a car, think twice.

Assess whether it is an asset or a liability. If you do not own your parking space and are just keeping up with the Joneses, then a car might be more of a disservice to you, for now, more than it can bring you value. Besides, gas and maintenance are so expensive these days! You might well opt for a secondhand car.

Another example is buying or renting a house. According to the book, except you're making money off it by renting it out, a house is a liability due to the underlying cost it entails. Maintenance, Property Taxes, Fees, are among the few.

So, it might be best to look for a cheaper apartment, find a roommate, and negotiate your pay.

You can also downsize your home and buy more assets than liabilities.

Habit #7- Save, Save, and Save Some More

Most importantly, a person who wants to live a life with fewer financial hurdles must instill the habit of savings anytime, wherever possible. Again, like the smallest unit of a particle -an atom- little habits can bring meaningful results to an individual's life.

It is the same with learning how to live below your means or living a frugal life. Also, paying yourself first is a great way to make sure you prioritize what’s important. 

There you go! These 7 Effective Habits can be your guide as your first step towards financial independence.

Further reading: The 30-Day Savings Rule – Easy and Step by Step Guide to Save More Money

How much money do you need to be financially independent?

To live an independent financial life, first, you must set smart savings or investing goals. It depends on one's motivation and personal choices. Even more likely with an individual's current life situation.

What is more important is that you can determine it on your own. There's no fixed amount you should follow or amount of money set in stone that your bank account should have to proclaim financial independence.

Some say it should be a million dollars or more.

So long as you're not generally dependent on someone else to pay your bills, are free of debt, and have enough money to live the life you want, you are living a financially independent life.

How can I become financially independent early?

Maybe you want to retire 5, 10, or 20 years from now. Regardless, it will depend on your financial habits and lifestyle. If you have the determination and persistence to do whatever it takes to achieve your financial dream, you will eventually live that life.

Aside from above smart habits, let me add two more ways for you.

• Cut-off People that don't add value and Block FOMO (Fear of Missing Out) – We're all social beings, and it's completely normal to feel intimidated or left out sometimes due to the different lives we all live. But, if you're serious about getting all your financial tracks in order, you also have to look within your circle.

Remember, you are an average of the five people you spend the most time with. So, choose a spouse or partner that shares the same views and values as you in terms of finances. It would be best if you got on the same page with your spouse.

If you're single, find an accountability partner or friend. This year, detach from unhealthy people and relationships that aren't serving you because it affects your financial well-being.

• Capitalized earnings – This year, may you be blessed with many business opportunities if you're a budding entrepreneur or start-up. One way to garner wealth is by establishing a long-term and sustainable business that will support you in the long run and serve people around you who need your talent, time, product, solution, or services offered.

You don't have to start with a huge capital; you can start small. Take a business course online, and study how to create a marketing or business plan, align your passion or hobbies and turn them into monetary value.

Final Thoughts

Amassing wealth and becoming financially independent is a slow process that takes time. You do small things every day—cut your expenses, generate extra income, save more money, and put the money into brokerage and tax-deferred retirement accounts. With time, it begins to amount to something.

In most American culture, young adults tend to achieve independence by the early age of 18. They leave home and try to find their way. While in most Asian countries, some parents still support their child even in their late 20s.

There's nothing wrong with that. We all have different cultures and environments where we are conditioned to grow.

In most cases, financial support from parents to young adults is mostly for household expenses. This could be sharing mobile plans or taking family vacations and that's nothing to be ashamed of.

So, for now, say no to retail therapy and make 2021 to a year to recover financially from the setbacks experienced this year.

How do you define your financial independence? What do you think are the best ways to achieve it?

Share it down below, and let's talk!