What Does Financially Self-Sufficient Mean?

Focus on income, debt and savings for financial self-sufficiency.
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Just because you’re able to pay your bills doesn’t mean you’re able to make it completely on your own, without the help of family or credit cards. Becoming financially self-sufficient requires taking steps to create a stable income, build savings and stay out of significant debt. Understanding how to create a sound financial footing will help you create the life and future you want.


Even if your income exceeds your monthly bills, you may not be financially self-sufficient. If you don't have money saved for emergencies or assets that you can liquidate quickly in the event of a financial crisis, then you are relying on family, friends or borrowing as your safety net. You also need enough money to build a sufficient retirement fund, or you will be dependent on others in your old age.


If you can make it on your own financially, there’s no reason to pay others interest when you buy things. If you are piling up credit card debt, it means you can’t live on what you make or that you’re overspending and relying on others to fund your lifestyle. Significant debt lowers your credit score, making it more difficult to get a home, car or other loan. When you need to borrow money, you might have to pay higher interest rates, put down a bigger deposit or tap friends or family for help.


Even if your income exceeds your spending and you have little or no debt, you’re living close to the edge if you can’t save money. One setback can start you down a path of borrowing or defaulting on debts you can’t pay. To ensure your financial independence, save money for emergencies, times of unemployment and retirement. You’ll know you’re truly financially independent when you have more income than expenses, little or no debt, a retirement fund and emergency savings. You will then be able to save for a college fund or vacation or begin investing.

Finacial Planning

To become financially independent, create a plan that allows you to build your net worth. Create a budget that helps you monitor your income and expenses, save for specific goals, reduce you tax burden and stay out of debt. Calculate what you need for monthly living, debt reduction and savings, and look for ways to attain those goals. For example, using a Flexible Savings Account reduces your income tax on money you spend on health care. Participating in a 401(k) match also reduces your taxes while you earn “free” money from your employer. Reducing your monthly expenses $30 here and $40 there each month can add up to thousands of dollars in annual savings and debt reduction. For example, spending $20 a week on coffee costs you more than $1,000 each year. In two or three years, you might have an additional $10,000 to $15,000 in savings or reduced debt just by doing things such as skipping one dinner out and one movie each month, changing your thermostat settings and raising the insurance deductibles on your cars.

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