This 4th of July, Declare Your Financial Independence

The Fourth of July — a time of national pride, celebration, ice cream and you guessed it, fireworks. But while you dress in your best red, white and blue and reflect on all the things this country stands for, it can also be a good time to think about where you stand financially.

This midway point of the year can be a great time to evaluate your financial health and consider ways to improve it. So, in the spirit of firecrackers and sparklers, take a look at some ways to help your savings shine the same way the sky will this Independence Day weekend.

Compounding Interest

While simple interest is earned only on the principal amount, compound interest allows you to earn interest on your interest. This means that every year you earn more on your savings as your accumulated interest from previous periods is calculated for each new period. This compounding interest is one of the main reasons it’s so important to start early to save enough money for retirement.

401(k) Match

When it comes to that retirement savings, there are different benefits to choosing different types of accounts. Employers that offer a 401(k) account may also offer a match. With company matching programs, you can earn up to $35,000 in retirement funds per year just by saving as you usually would (the maximum employee and employer contribution is $53,000 for 2015, according to the IRS). If your company offers matching contributions, it’s a good idea to put in enough money to get the full match.


Investing can be a great way to boost your savings — if you know how to do it. A key technique in successful investment is reducing risk through diversification of assets. This means you don’t put all your eggs in one basket. When you are looking to improve your portfolio or even just get started, it’s a good idea to put your money across several categories like stocks, bonds and cash, depending on your goals, risk tolerance and timeline for when you will need the money. Diversification is not a guarantee against loss, but it can lower your risk while providing the necessary exposure for potential reward.

Passive Income

While you are filing your income taxes and evaluating your budget, you may find that your salary alone is not getting you quite where you want to be. You could look for ways to earn passive income, which is income you get on a regular basis but requires little effort to maintain. It may involve the majority of work upfront (like buying and fixing up a home that you then rent out) or doing very little work but seeing some returns over time (like peer-to-peer lending).

If you’re not checking your credit reports and credit scores regularly, now is also a great time to check in on those, too, and establishing a routine for it. Getting your credit reports and credit scores on a regular basis can help you stay in tune with your standing, and to spot signs of fraud, errors or general problems that need your attention. You can get your credit reports for free every year from each of the major credit reporting agencies, and you can supplement that by getting your free credit report summaries on every month.

No matter what strategies you choose, now can be a great time to evaluate and improve your finances — and have a great long weekend celebrating your freedom to do so.

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This article by AJ Smith was distributed by the Personal Finance Syndication Network.