Declaring your financial freedom

While you're celebrating Independence Day, give a thought to your own financial independence. Some analysts think we could be headed for a double-dip recession, and it's important to be ready. Kelli Grant, Sr. Consumer Reporter for SmartMoney.com, offers some tips on how to secure yourself financially.

First, pay down your debt.  A big part of financial independence is to have more assets than debts. It's tough to save if you have big monthly commitments in the form of loan and credit card payments. Start by tackling small balances first.  Once you've zeroed them out you'll have the confidence and cash to put more toward bigger debts.

Also, beef up your retirement contributions.  A healthy balance in your 401(k) or IRA is the key to maintaining independence long after you retire. Even small contributions make a big difference over the years thanks to compounding interest, so start now even if you can't put aside much. If your employer offers a match, try to give enough to get all that free money from them.

Don't be afraid to negotiate for a raise.  Earning more is a fast way to be more independent, and some companies are starting to offer merit-based raises again. You'll have a better chance if you time your request to coincide with a big achievement, and can point to other ways your work has made a positive impact on the company's finances.

It's also a good idea to add to your emergency fund.  In uncertain economic times, it's a smart idea to have at least six months worth of living expenses saved up in a high-yield checking account that you can easily access in case of an emergency. A recent survey found that most Americans couldn't even access $2,000 easily if needed, which is a good indication we're not saving enough. Start small, and make regular contributions from each paycheck.

And finally, invest more.  As important as it is to have money set aside in savings, you're missing out if you're not in the market. Right now, even high-yield saving as getting about 1% a year; long-term, the average market return is 8%.  Once you've hit all the other financial independence goals we've talked about, look to make regular contributions to a low-cost mutual fund.

For more information on how to secure your financial independence and other personal finance advice, visit. www.smartmoney.com.

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