The Young Professional’s Roadmap to Financial Freedom: Embarking on the Journey

It’s pretty simple: having financial resources translates into freedom—the freedom to travel, live where we want, help others, send our kids to the best schools, and decide when, how, or if we want to work. Wealth grants us the freedom to enlist the help of others when time or energy is limited, help those we love when they are in need, or contribute to the community at large in generous and impactful ways. Fundamentally, wealth grants us options and choices to live a fulfilled life. 

Even though it may feel overwhelming at first, accumulating wealth doesn’t have to be hard or complicated. There are a few key financial concepts and habits that once mastered, increase your odds of living a fulfilled life. However, many young professionals don’t know where to begin. After all, no one is born with an innate knowledge of how to handle money, and with so many competing priorities, saving and investing can often get pushed to the back burner.

Winning the Battle Against Yourself

Strong financial habits are at the core of wealth-building and must be learned and practiced. Even though sound spending and saving principles might not be complicated, they can be hard to master. Saving regularly is a struggle for most people because of how we are built.

Due to our brain’s inherent function to help us survive and desire to keep us alive, we are hard-wired, as humans, to avoid discomfort. This can lead to overspending in the present at the expense of saving for the future. It causes us to “live in the now” and throw our future goals to the wind (at least some of the time). Our wiring also causes us to prefer the status quo over change. This is where automation and using technology to our advantage comes into play. Our own human nature is why we find it challenging to save consistently and ensure a secure financial future. 

But, with some practice, we can all overcome these tendencies. It is not simply knowing what to do, but also doing what we know. Your future self will thank you (and your near-future self will likely live much more peacefully without as many money worries on the mind). 

Where to Begin

Here is a handy outline of the fundamental financial principles that can help you on your road to financial freedom. 

1. Build & Stick to a Budget: Time to tell your money where you want it to go by developing a spending plan. There are a number of different methods and applications you could use for this. The particular budgeting method is not important as long as you have a system for you that works. The goal is to save and invest while covering all your living expenses. If you feel you are unable to save and invest with your current budget, consider enacting some lifestyle adjustments to make this a reality. Ideally, the dollars allocated toward savings will be systematically transferred into a savings account on a consistent schedule.

2. Fill Your Emergency Fund: Get a flat tire? Take your child for a visit to the ER? Lose a client? That’s what your emergency fund is for. How much needed in this savings account will vary based on the reliability of your paycheck, your marital status, and whether you are self-employed (or hope to be). Having at least 6 months’ worth of living expenses in your emergency fund to cover unexpected expenses is a great place to start.

3. Work to Pay Down Consumer Debt: Debt is a drag on your ability to build wealth and acquire financial freedom. It’s like spending money on the past when you should be working to enhance your future. Use excess funds to pay down debts with the highest interest rates first. If being completely debt-free is your goal, then start to chip away at larger debts- like your mortgage-as you begin to save and invest.

4. Automate Your Retirement Savings: First, contribute the maximum amount you can to your 401k plan, especially if you receive an employer match. Having funds taken directly from your paycheck provides ease and consistency. Then, decide where to invest additional funds. You may choose a Roth IRA, a traditional IRA, or a brokerage account. Make sure to consult with your CPA and financial advisor about which option is best for your goals. 

5. Save for Your Big-Picture Financial Goals: This could be saving for college, saving to buy a piece of investment real estate, saving for a vacation, or being more aggressive about paying down debt on a primary residence. Whatever your personal long-term financial goals look like, here is where you will prepare for those.

6. Build a Team of Professionals: A financial advisor and a CPA will help you align investment and tax planning choices to your specific goals. Your team of professionals can help keep you accountable and on-track to achieve the financial freedom you are working so hard to achieve.

7. Enjoy: This is the fun part! Preparing for the future is important, but enjoying the present is equally important. Developing solid financial habits is essential to having resources for both the here and now and for our future. Once you have paid off consumer debts, achieved a healthy emergency fund, automated retirement savings, and enlisted a team of professionals to help you along the way, you can feel more confident that lifestyle choices and additional spending today are not going to jeopardize your ongoing journey toward financial freedom. 

With practice, these principles get easier and become a way of life. The earlier these habits are developed, the better the chances for success. Financial freedom can become a reality for anyone interested in investing in their future.

Written by Jule Fortin in collaboration with Lexicon Content Development