07/18/2013 11:46 am ET Updated Sep 17, 2013

4 Ways to Increase Your Financial Independence


Most of us celebrated Independence Day weekend with picnics, barbecues and fireworks. But as you took some time off from work to enjoy your holiday with your family, it was also an ideal time for you to reflect on ways you can expand your personal financial freedom.

There's no question that achieving financial freedom is more difficult now than it used to be. With record levels of wealth disparity and declining median incomes eating away at the middle class, most of us are just struggling to make ends meet.

But during the Great Recession, many families learned the hard way that even home ownership and stable jobs don't necessarily shield us from poverty and financial ruin.

While total freedom from financial obligation is probably an unrealistic goal for most of us, there are still a few steps you can take that will enable you to gain firmer financial footing and leave you less vulnerable in times of financial hardship.

One of your first priorities should be to put away three to six months' worth of savings. Lacking savings means you're living in what economists call liquid asset poverty, meaning you don't have the funds to help you get by for three months or longer. Not only does this mean you're unprepared for a financial emergency -- it also prevents you from taking advantage of economic opportunities that will actually build wealth in the long-run. For example, having the cash for an upfront down payment on a car or a house may enable you to pay lower interest rates and save significant amounts of money.

Another big priority is paying down your debts and working toward having a positive net worth. Of course, not all debts are created equal. The higher the interest rate, the more you're paying to borrow money, so when choosing between paying off a credit card bill or a federal student loan, go with whatever charges higher interest.

Devote some time toward long-term wealth building. Look into starting an IRA fund and educate yourself on different investment options for your retirement. But wealth building doesn't always mean budgets or savings -- also remember to invest in yourself by researching seminars, retreats, workshops and other opportunities for you to strengthen your leadership skills and advance your career.

Finally, always work toward developing personal safety nets. Even large savings and high salaries don't guarantee financial security during challenging times. Without some form of health insurance, your financial fortunes can suffer a drastic reversal in the wake of a recession or emergency.

Try some of these steps to increase your financial freedom and celebrate every day of the year.