Alizah Salario Published Thu, Jan 9 20205:09 PM EST
This article originally appeared in Grow Acorns.
This week, actress and activist Meghan Markle and her husband Prince Harry announced that they intend “to step back” from their duties as “senior” members of the royal family and “work to become financially independent.” In a break from tradition, the couple plan, going forward, not to receive funding from the Sovereign Grant, which is a lump sum of taxpayer money used for official royal duties.
The Duke and Duchess of Sussex have an estimated net worth ofbetween $30 million and $45 million. So in their case “financial independence” appears to mean relying more on their own funds in exchange for the freedom from the expectations and obligations of public life, as well as more flexibility around where they live and the work they do.
For the rest of us, though? It varies. “Financial independence means different things to different people,” says Tara Unverzagt, a certified financial planner at South Bay Financial Partners in Torrance, California.
Here are three kinds of financial independence and strategies experts suggest to help you achieve them.
1. The means to pay bills and cover basic expenses
For young adults, the core of financial independence often is self-reliance. “Some people just out of college are trying to get financial independence from their parents,” says Unverzagt. “They are working towards getting out of the family house and paying for all of their bills themselves. That’s financial independence for them.”
Striving to be more financially self-sufficient in your 20s is smart, but being fully independent, in practice, can be harder than it seems. The majority of Americans say young adults should be financially independent by age 22, but only 24% of them actually are by that age, according to a 2019 analysis from the Pew Research Center.
Among those who still rely on at least some financial help from a parent, 60% say that the assistance is related to basic household expenses such as groceries or bills.
If you’re working toward more self-sufficiency, start by getting a better understanding of what’s going on with your money, including both how much you’re making and how much you’re spending. The “first step to getting your financial foundation laid is tracking your expenses” using a budgeting app or a spreadsheet, says Unverzagt.
That can help you get a sense of where you are financially, she says, and knowledge is power: “If you don’t have a handle on your cash flow, you’ve relinquished control of your financial situation.”
2. Freedom from family expectations
If you rely on financial assistance from a family member, it’s not unusual to feel bound by obligation to them. That can mean having to make minor adjustments, like limiting your data usage if your parents pay your cellphone bill. Or it can mean compromising on major decisions, such as picking a college major or career in line with someone else’s expectations instead of your own desires.
“The primary benefit of financial independence is that you cut many of the emotional strings that tie you to family money,” says Justin Pritchard, a certified financial planner and the founder of Approach Financial in Montrose, Colorado. “The things you do in life can become more of a choice, as opposed to obligations that you might feel as a result of your good financial fortune.”
If you’re lucky enough to be in a position to receive “financial scaffolding” from your parents as a way to develop your skills or build a business, feel free to “take advantage of the window of opportunity” when you’re young and accept some financial support, says Michael Caligiuri, a certified financial planner and the founder of Caligiuri Financial in Columbus, Ohio.
The primary benefit of financial independence is that you cut many of the emotional strings that tie you to family money.Justin PritchardCERTIFIED FINANCIAL PLANNER
It can help to weigh the short-term compromises against your long-term goals. For Julia Peña, who graduated from Syracuse University in May 2019, living under her parents’ roof over the summer allowed her to achieve her goal of saving the majority of her $3,500 in earnings from her summer job.
“I basically put about 90% of what I made into my savings account, so typically I went back to school with about $3,000 to last me through the fall,” Peña told Grow last year.
The privilege of financial support from a loved one may come with compromises, but it can also have a positive influence on your long-term financial health. If you live at home in order to save up or pay off debts, for example, you may be even better poised to get a lucrative job or build a firm financial foundation when you do strike out on your own.
3. Increased flexibility and options
At advanced levels, financial independence is “having enough money that you can quit your current job any time you want,” says Unverzagt. “You could go part-time, change jobs, change careers, take a year off, etc. They can’t stop working forever but they have enough money to have a lot of flexibility.”
Typically, getting to this stage requires a combination of time and effort. FIRE devotees, or members of the Financial Independence, Retire Early movement, tend to set aside huge portions of their income, for example, and have extra streams of income.
But even with just a single paycheck, if you make contributions to your retirement fund consistently, you can stay on track to meet your financial goals. Consider setting up automatic withdrawals from your pay that go directly into a retirement account or a targeted savings account to make investing and saving even easier.
Caligiuri adds, “Financial independence to me is when you’ve created a situation where, whether it’s through support or not, you’re getting to where you’re doing what you want to be doing.”