In order to have financial freedom you must take ownership of your finances so you aren’t buried in a pile of debt. Instead you will be papered for unexpected events and expenses by actively saving.
1. Understand Where You Are At
You can’t gain financial freedom if you do not have a starting point. Began by taking a look at how much debt you have, and how much you don’t have in savings. This need can be a depressing reality, but this is an important step toward getting yourself out of debt.
Make a list of all your debts you may have, from mortgage, to money you may have borrowed from family and all your debits in between. Now add up the numbers to see how much debt you have? If it’s a huge number, don’t panic, with hard work and preservation and these steps you will be able to work your way out.
Next, take a look at all the money you have saved up. Make a list of all your savings, from your savings accounts, to company retirement-matching programs. Also add in all income you bring in.
Now, as we work through the next few financial freedom steps, keep these sums in mind.
2. View Money Positively
You maybe a little discouraged right now, but remember that money is a good thing, even if it seems to be a burden right now. You deserve to achieve financial freedom. Money is a necessity like food. It allows you to buy the things you need and live the life you want.
In order to experience financial freedom, you will have to look at money as a tool which will to help you achieve your goals, and live a life you can enjoy. This is because by viewing money in a negative light, you’ll subconsciously sabotage the chances you have of making it and more importantly being able to keep it.
3. Write Down Your Goals
Why do you need money? What are your goals? Achieving financial freedom, is more attainable when it is tied it to an emotional goal. You probably won’t accomplish the goals you wrote down in a month. However, a year is a long enough time period to see the progress you’re making towards your goals. Also, understanding exactly what you want to achieve makes obtaining financial freedom a million times easier. Ensure that your goal is tied to a specific number which you would like to hit. Believe it or not, you’ll start achieving your goals without even knowing it.
4. Track Your Spending
An important step toward financial freedom is tracking your spending. There are many apps online which you can use. These apps will let you know how much money you’re spending, which categories you’ve overspent in, how much money is in all of your accounts, and how much debt you have. Many of them also have goal keeping section of the user interface, which will allow you to stay focused on your goals.
5. Pay Yourself First
Paying yourself first, is a very important step in gaining the financial freedom you crave. This simply means putting a set amount of money in your savings account before paying anything else. Why?
This is because if you want to pay yourself 10% of your pay per period first, then whatever’s left over needs to go towards bills. If you don’t have as much as necessary to cover those bills, then you’re forced to pick up a side income to make up the costs. By paying yourself first, you guarantee that you’re always putting money aside to invest in yourself. By doing the opposite, you only get whatever is left over, which usually isn’t substantial enough to help you save and experience financial freedom.
6. Spend Less
Buying less stuff can actually help increase your wealth. By spending less, two things work in your favor. One, you’ll have more money to put aside for your financial freedom. Two, you’ll learn that you actually need a lot less stuff to survive, which also helps you put aside more money.
And this goes into our next point…
7. Buy Experiences Not Things
Are the things you buy making you happier over the long-term? Does the debt you have from buying a bunch of stuff make your life easier? Life’s short. It’s not about hoarding all your cash until you’re 65. You’re allowed to enjoy life while you’re alive, and at the end of the day, the things which will help you live a more fulfilled life will be the experiences you have, not the things you own.
Life is made up of moments. The best ones come from quality time spent with friends and family. While some products can help bring you closer to your family (like weekly family video game night) most of them don’t add much value.
8. Pay Off Debt
A lot of people feel the same thing after finishing their last debt payment: relieved. If you have $50,000 of debt, even if you have $30,000 cash in the bank, you can’t really call yourself financially free. You’re still $20,000 in the hole. While paying someone else isn’t as glamorous as having money in the bank, it does bring you closer to financial freedom.
There are two main methods of paying off debt: snowball and avalanche. Snowball is when you pay off the smallest debt first. Avalanche is when you pay off the debt with the highest interest rate. You need to decide what works best for you.
Paying off a big debt lifts a massive weight off your shoulders. After paying off your debt, you see the amount of money you have in the bank rise. It’s an awesome feeling watching the number climb (even if you had to watch it fall at the beginning), and it keeps you motivated to continue growing it.
9. Create Additional Sources of Income
Okay, at this point, you’re probably thinking, “My debt is a lot more than my salary, how can I pay it off if I don’t make enough?” If you’re serious about financial freedom, you will have to sacrifice some blood, sweat, and tears.
Your 9 to 5 might not cut it. If that’s the case, you need to step it up and look for money outside your current job.
Some experts recommend having seven streams of income. If you have a 9 to 5 job, congratulations, you have one, only six more to go!
10. Invest in Your Future
The last financial freedom tip is an important one. Say you follow the advice and recommendations in this article, get out of debt, and grow your savings. That might be enough to help you out right now, but what if the unexpected happens? Will you be prepared for it?
It’s important to set aside money for rainy days, retirement and other unexpected expenses. If you’ve got that 9 to 5 job, talk to your company about adding a retirement plan, or check to see if you’re already having deductions made towards it. The deduction gets taken out before it hits your account, so you never feel like you’re losing money. And it’s pretty cool to check it out periodically and see your savings grow.
Next, you also want to save enough money for an emergency fund. Some experts say $10,000 is fine while others say six months of your salary. And to be honest those numbers can seem pretty high if you don’t make a lot of money. So instead, start with a goal you can afford – like $100 your first month. Also, as you start earning more income, start increasing your goal to $500 a month to $500 bi-weekly and so forth. If you’ve overspent on credit and a high credit card bill comes up, don’t use your emergency fund – focus on taking up more active income opportunities so you can pay it down faster.
The emergency fund is only for unplanned emergencies like a tree crashing onto your house, a car accident you need to pay for out of pocket, or a visit to the hospital. By setting aside money for rainy days and retirement, you’ll be less likely to end up back to where you are now: wishing for financial freedom.
In conclusion, by following the tips in this article, you’ll inch closer to achieving the financial freedom you desire. Financial freedom can help you take ownership of your life. It’s about living within your means, being a bit frugal, and making sure that money is spent on things you really need like food, shelter, and vacations (relaxation is important too.) So take a look at those finances, build additional streams of income, pay down that debt, and before you know it you’ll be free.