Your finances can take a toll on you mentally. We all want to have financial freedom, but many of us don’t know how to achieve this life goal. Living a financially free lifestyle can be done, but it will take time and effort. We are here to help you!
What is Financial Freedom?
Financial freedom is the consequence of the act of being smart with your money. You get to make life decisions without stress as you get prepared financially for all financial impacts. You’re in control of your finances without your money controlling you. You’ll also prepare yourself for unexpected emergencies.
Anyone can achieve financial freedom through smart saving and investing, especially if you are patient with a clear focus. You will be on the right track if you’re controlling your spending and having a positive cash flow.
How Can You be Financially Free?
Achieving financial freedom relies on your motivation and setting goals for personal finance. You need to set goals for yourself to help keep you motivated. For example, if you want to be financially free by the age of 30 and retired by age 50, then spend time working on a plan of action and sticking to it.
By putting in the work and following these six helpful steps, you will be on your way to being financially free sooner rather than later.
1. Track Your Spending
It would help if you spent less than what you make to reach financial freedom. Spend time every month to create a budget, and it’ll show you what you’re earning and what your expenses are. Try to stick to your budget and not contribute to unnecessary spending.
2. Pay Off Your Debt
Nobody wants to spend their lives paying off debt. Car loans, credit cards, student loans – these are all expenses that you need to get rid of quickly. Start by paying off your debt with the highest interest rate and work your way down to the lowest interest rate debt. Once your debt gets paid, you’ll have money freed up that you can use for saving and investing.
But remember, debt is not always a bad thing and you should not fear it. If the debt brings you positive cash flow (gives you more than it takes away) you may want to consider even taking more debt. Spreadsheet is your best friend, trust it.
3. Reduce Your Expenses
Start teaching yourself how to be good with money, and one of the best ways to learn is by cutting your expenses. Try to reduce impulse buys, such as unnecessary subscriptions or groceries. Your new money management skills will benefit you in the long run, and these small changes will have a significant impact over the years to come. Checkout more tips from our video 5 Simple Ways to Save Money.
4. Increase Your Income
Unfortunately, saving, investing, and living a frugal life is not the only thing you need to be doing to reach financial freedom. Finding ways to increasing your income will help you pay off your debt faster, save and invest more, and put you in a better financial situation. Ways to increase your revenue can include:
- Get a second job part-time, like a side hustle. Whether it’s delivering pizzas over a weekend or selling unused items on eBay, you will be earning extra money to increase your income.
- Ask for a raise at your work. Approach your boss or HR department and ask them if you can get a raise. The worst that could happen is they’ll decline your request. Best case scenario? You’ll be earning more each month! You can boost your chances to get raise by knowing your real value. Learn more how to do that by watching this video: Salary Expectations vs. Reality & Product Pricing.
- Put in extra hours at work to qualify for overtime.
- List your spare bedroom on Airbnb. If you have an extra room not being used and don’t mind the occasional stranger sleeping over, why not make some money?
Investing your cash will help you reach your goals faster. Whether you put money into an interest-bearing savings account or invest directly into companies or via funds, you will make your money work for you.
Try to focus on investments that generate passive income streams over the long term. If your work provides 401(k) benefits, make sure to contribute towards it. Most companies will match your contributions so that you can save towards your retirement quicker.
With investing, you are setting your money up to grow with compound interest. This is achieved by the interest growing interest. As Albert Einstein has said: “Compound interest is the 8th wonder of the world“. You should check out the 8th wonder before you check out the other seven!
Other investment options include investing in real estate or index funds. Make sure to research the type of investment in which you’re interested. Money makes money, and you don’t want to miss the opportunity!
6. Start Saving
You will never be financially free if you don’t save your money. If you start saving money towards an emergency fund, you will prepare for unexpected emergencies, such as your car needing repairs.
Start saving for retirement. As mentioned before, this gets done through a 401(k) and/or via low-cost index funds. Setting yourself up for retirement will bring you closer to financial freedom, and you will live a less stressful life when you’re retired.
Work out a savings strategy to determine how much you need for emergencies and how much you need to retire comfortably. By planning, you will have a clear guideline on how much money to put away each month to reach your savings goal.
Enjoy Life and Reach Financial Freedom
You experience failure if you stop living your life. Enjoy the people close to you and continue to share new things. Everything will be okay if you fail occasionally.
If you have a bad month financially, evaluate what went wrong and find ways to improve your situation. Relook at the steps provided and reread your goals. Introspection will help you see the bigger picture and get you motivated to continue your financial freedom journey.
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Financial freedom is possible. Set personal finance goals, stay motivated, and don’t give up. You can achieve financial freedom by keeping to your budget and letting your money work for you. It will take time, but time is what you need to accomplish this.
Remember that we are here to help you every step of the way. We’ll provide you with all the information you’ll need to get started on your journey, and you’ll get to transform your life!