(Baby) Steps Toward Financial Independence

Financial independence is one of the last external steps towards adulthood.

While we can move out, get a degree, and even hold down a job, many of our parents are still helping us out in our early twenties.

To get closer to reaching financial independence, here are some tips to keep in mind.

Manage Your Money

First, open a checking and savings account. Open these accounts through your parents under their bank or credit union. If you don’t want to go through your parents, research as much as you can by yourself. Hidden fees, like annual membership fees and overdraft fees, are lurking, but with proper research, you’ll pick a financial establishment that will help you become financially independent, instead of still needing financial help.

Get a Place of Your Own

If you are still at home, work until you have enough money to move out and then some.  Application fees, deposit fees and rent are all needed to actually get a place of your own. This largely depends on where and how you want to live, but saving at least $1500 to $2000 is a good start. In addition, there are also resources available to help those with low income pay utilities, such as getting the account deposit waived and PG&E’s CARE Program. To qualify for CARE, there are several guidelines that must be met, including: not being claimed as a dependent on anyone’s tax return except for your spouse, and meeting income guidelines. For one person, you must make more than $22,340 annually. For each person added, roughly $8,000 is added to total household income to qualify.

Get your Taxes in Order

Collect all paperwork involving income (pay stubs, student loans, etc.). Are you claimed as a dependent on your parents’ tax returns? You are if they support you more than 50% and you made less than $9,750 in 2012, but as you move towards financial independence this will change (and benefit you with that tax refund). If you are paying back student loans, you can claim deductions if interest was paid in the file year. According to the IRS, “the amount you may deduct is the lesser of $2,500 or the amount of interest you actually paid…The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on a 1040 form.”

If you are still a dependent, it is still a good idea to file taxes to receive money back, such as income tax withheld from your pay. There are also education deductions you and your parents can receive, such as the American Opportunity Credit; www.irs.gov has a plentitude of valuable information to check out that can only help you.

Plan for the Future

…And as always, save. Take advantage of your employer’s 401(k) retirement plan, or get your own IRA. If this feels like too much for now, still put aside a percentage of each paycheck into your savings account for an emergency fund.

Even if we are still Lost Boys and Girls inside (Peter Pan, anyone?), becoming financially independent is incredibly worthwhile—it makes you that much more of a capable, savvy adult, ready to conquer the world.


Angie Picardo is a staff writer for NerdWallet, a personal finance website dedicated to helping consumers find the best credit cards.

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