Jan 31, 2024
You’ve probably seen headlines and heard money gurus wax poetic about Americans not doing enough to move out from under their parents’ roofs (and wallets) — and the reality is, many Americans are struggling to make ends meet on their own.
Roughly two-thirds of Americans believe it’s important to reach “financial independence,” according to a recent survey commissioned by financial services company Empower — although nearly a quarter note they haven’t achieved it yet.
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What’s standing in their way? Respondents believe the average American must make at least $94,000 a year to meet this milestone, even though the real median household income in the U.S. is just $74,580, according to the latest government data.
Still, 60% of Americans feel optimistic they can reach this magic milestone — here’s how it can be done.
What does it mean to be 'financially independent?'
Financial independence can mean a lot of things to different people, but nearly half (47%) of respondents in the Empower study agree on this major tenet: no longer needing to receive money from family and friends.
Although parents who were polled say their children should start showing signs of financial independence and pay for their own expenses by the time they hit age 23, an overwhelming majority (92%) of survey respondents who were financially independent say they didn’t start feel that way until they were around 36 years old.
A stunning 57% of respondents say they still rely on family and friends for some degree of financial support, such as paying for rent, internet and streaming services and phone bills.
This may not be surprising given how much financial pressure young Americans experience, thanks to hefty student loans, high interest rates and a tough housing market that may be contributing to a widening wealth divide.
They’re also less likely to have spare cash set aside for emergency savings, a retirement fund or even for moving out. Nearly half of Americans ages 18 to 29 live with family, according to a survey conducted by Harris Poll for Bloomberg.
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You can reach financial independence, too
Even if you’re not making $94,000 a year at your job just yet, there are still ways you can conquer financial independence.
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Start by taking a look at your spending habits. Perhaps it’s time to cancel subscriptions you rarely use or reduce the amount of take-out food you order.
Make an effort to stick to New Year’s resolutions about your finances. Take social media trends such as “no-spend January” to the next level with a “no-spend year,” where you budget for your needs and avoid frivolous purchases for 12 months. You can put whatever money is left over from your paycheck toward your savings, investments or debts.
It’ll be easier to avoid asking your parents or friends for help if you start tucking away some cash into a rainy day fund for emergency or unexpected expenses. You can even consider a high-yield savings account, and earn 5% interest or more on your savings.
If you’re lucky enough to own a home, or simply have extra space you don’t use, consider supplementing your income by renting a spare room on Airbnb.
There are also alternative ways to invest in real estate without the responsibility of being a landlord. Some platforms will let you get into commercial real estate by owning shares of properties leased by national brands like Whole Foods and Walmart. Or, consider investing in a bundle of properties that generate income, such as real estate investment trusts.
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
