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Financial Independence: Flourishing Under 40

Financial Independence: Flourishing Under 40

August 27, 2021

Last week, our article discussed the 6 fundamentals we believe influence the ability to attain financial independence, an endeavor pursued by many. This week, we’d like to suggest a few strategies in applying those fundamentals for those just starting out and up to about age 40. See below for a few ideas to put yourself on a path to financial independence.

  1. Creating a financial plan with written goals: If you’re under 40, you’ve got time on your side. You likely have anywhere from 15-30 years to reach your goal. If your goal is financial independence, an advisor can help determine the steps to get there. Planning while in this age range will help to set habits (living within means, saving/investing, etc.) that will set the foundation for your financial life over the next several decades. The advice here is to set realistic goals and write them down. There is something different about writing a goal down and just talking about one. Writing it down makes it real and helps hold you accountable when you see the goal on a piece of paper down the road. This alone will put you ahead of the majority of people under 40. 
  1. Choose your lifestyle: You may have heard the phrase “comparison is the thief of joy.” The fundamental idea that you – not anyone else – should choose how you live your life and spend your money is actually more difficult to conquer than expected. When you’re in the beginning of making decent money the expensive watch, car and house that your friend just bought are desirable, but don’t let them dictate your life. You need not live like a miser, but make sure you can reach the goals you’ve just written down from the point above. 
  1. Dominate Debt: Many people under 40 deal with credit card balances, consumer debt or student loans. Have a plan to pay these off at or before 40. You don’t necessarily need to eradicate them all before saving for retirement, but paying them off sooner will free up more for savings and save on interest being charged. Typically, it’s advised to start with the highest interest debt first. A mortgage, however, is viewed by some as “good debt.” A house will mostly likely appreciate over time, and with rates so low (especially right now) you can probably get a better return on other investments. 
  1. Consider Cash Flow: It’s pretty simple – spend less than you make. If you’re spending more than your income, consider doing everything you can to change that. Twice a year look at what you’ve spent. Cut out unnecessary costs and put into savings. Another option is to look for opportunities to increase your income. Strategize promotions, start a side gig, change jobs or careers if you don’t see your current path producing the results you originally envisioned. 
  1. Saving and Investing: A finance professor often exclaimed, “pay yourself first.” Before giving your money to other parties (Amazon, BMW, Gucci) – put some money in your pocket. Also, compound interest is a powerful instrument. The younger you are the greater you can benefit from more time with money invested. Young people not only need to learn the power of saving, but also of making sure those savings are working for you earning interest. Saving $9,000/year starting at age 23 earning 7% comes out to around $1M at age 55. 
  1. Tax Planning: Your strategy around a company retirement plan will impact your taxes. When you first start working – put as much into your 401k as possible (considering other goals). Look into how much you can defer and if the company matches. Also, determine if pre-tax or ROTH contributions are right for you. As your income increases, you can consider charitable giving and state tax credits among other, more complex, tax strategies.

We realize this is not a one size fits all topic and there are many ways to reach a place in life where work is no longer a necessity. With our clients, we start with planning and move through the other fundamentals that apply before diving into the complexities that come with growth and getting older.

Please reach out if we can help you define and realize your financial independence,


Matt and Andrew