5 Steps for Financial Independence

5 Steps for FI: These general ideas can help shape your journey to Financial Independence!

In no way are these 5 basic steps guaranteed to help you “get rich quick.” Nor are they unique ideas no one in the history of personal finance has ever put into print.

These 5 basic steps are based on my takeaways from reading about personal finance that can help most middle income earners. But a big disclaimer here: I am not a certified financial planner. This is advice that I’ve found accessible and helpful — and is emphasized by many personal finance bloggers who write for beginners. I share this list with students to help give a long-term focus for financial health and well-being.

Step 1: Start building an emergency fund

Whether it’s a $5 a week transfer or a deposit of a tax return or bonus, the key is just setting up a savings account. I’ve found success with setting one up through Ally Bank that is separate from my checking account to make it harder to access the money (one extra step does wonders for my self discipline). Here are some of my experiences with savings.

The general advice to to build at least $1000-$2000 at first. This can help in the case of something like car maintenance or a prescription for an illness. According to a report from the Federal Reserve, 40% of Americans cannot afford an unexpected expense of $400 or more.

Hopefully you will not have to go into debt in order to cover one of these unexpected expenses. And the overall goal is to eventually have 3-6 months living expenses in a liquid account, but start with small goals.

Step 2: Set up a retirement account

If you have not set up an individual account or signed up for one through your employer, do this ASAP. Call/email/see your Human Resources department for information about 401(k) or 403(b) plans or perform some internet research to compare Individual Retirement Accounts (IRAs) — or both!

Setting one up early can help with the magic of compound interest (making money on your money!!) and some employers offer a match that is free money to pad your retirement savings.

Step 3A: Pay off all “bad debt”

Note: Some financial advisors view all debt as “bad debt,” which is understandable. However, when getting my financial life in order, I focused first on the “bad debt” to make the debt payoff process a little easier to handle mentally. You may choose to work to pay off any sort of debt all at once, and that is perfectly fine.

What’s bad debt? Anything with a double digit interest rate — usually credit cards are the first thing to come to mind here. And most credit card debt comes from consumer spending on stuff we maybe shouldn’t have purchased in the first place (I’m looking at you, Wayfair couch that fell apart within a year).

Find a payment schedule that works for you and work as hard as you can to pay these debts off. It won’t be fun. Not by a long shot. But there’s an amazing feeling of freedom that comes from not paying triple digit fees each month.

You’ll want to have a handle on your spending in order to make sure the bad debt doesn’t creep up again. Try to stick to a budget and plan to save for large purchases instead of swiping the plastic.


It’s break time! If you’ve already done Steps 1-3A, give yourself a pat on the back. Celebrate with a glass of champagne or, if you’re my students, some good, clean fun.


Steps 3B-5 can and should be completed concurrently. You can focus on one more than the others to align your actions with your goals.


Step 3B: Pay off all “good debt”

What’s good debt? Everything else that is a liability.

Pay off your student loans, mortgage, car loan, etc. with a payment schedule that works for you. The faster it’s gone, the higher your net worth. Yay!

Step 4: Diversify Investments

In addition to your retirement account, you can find more options to make your money work for you (although these options do not have the tax benefits of a 401(k) or IRA).

Stocks. Bonds. Mutual Funds. ETFs. Index Funds. Real Estate.

Confused as to what some of those mean? I explain some common investment options here.

I started simple investing with Robinhood and many people have tried Acorns to start testing the waters with investments. I use Robinhood to purchase individual shares of companies I research, but also ETFs (which are basically already diversified vehicles that have lower fees than most mutual funds).

Step 5: Max out your retirement contributions

In 2019, the limit on a 401(k) is $19,000 for an individual and $6,000 for an IRA (there are additional stipulations based on income and age, but I’m keeping it basic here). These accounts provide tax advantages and can be excellent tools to build wealth and maybe even start to plan for early retirement if that’s your jam 🙂

I hope these fundamental steps can help inspire your journey to getting your financial life in order! There is no one-size-fits-all approach to personal finance, but any tactics that help you reduce debt and build wealth will lead to more freedom.

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