Financial freedom is more than just a buzz word. It is an achievable way of life, whether you are rich or poor. Financial freedom can be defined as having enough savings, financial investments, and the ability to afford the type of life you desire. Let your money work for you instead of you working for your money by following these steps.
The 9 Steps to Financial Freedom
1. Know Your Financial Situation
Achieving financial freedom is a process. The first step in the process is having a full understanding of your current financial situation. Create a list of all your debts. Next, count your current savings and investments. What is the total of your recurring monthly payments? Once you know this information, you can begin to plan toward your financial freedom goals.
2. Change Your Attitude About Money
Often, our thoughts about money come from our family and society. Be sure that you have a positive mindset about money and finances. Sometimes debt and lack of wealth can be gloomy, but don’t let it distort your goal of financial freedom.
Also, try to refrain from thinking about financial freedom as a thing of the future. Focus on financial freedom, not retirement. You can achieve financial freedom well before you retire.
3. Create A Plan and Write Down Your Financial Goals
To help determine your financial goals, ask yourself a series of questions:
• What does financial freedom mean to you?
• How much money (approximately) do you need to achieve financial freedom?
• What is your timeline to achieve financial freedom?
Once you have your vision written down, you can then begin to execute the plan.
4. Track Your Spending and Budget
On the road to financial freedom, track the amount of money you are spending. Create a budget to serve as a guide for your spending. There are many websites and apps that allow you to create a monthly budget.
5. Eliminate Credit Card Usage
Use cash or a debit card for everything. To gain more financial freedom, you have to eliminate debt. If you have any credit card debt, pay it off and refrain from using the card. Only use credit cards if you can pay the balance off at the end of the month.
Pay yourself first. Start out by saving at least $1,000 for an emergency fund. Next, build up your savings. Each month put a certain amount of money in your savings account before paying bills. Over time, this money will grow and serve as a financial foundation.
7. Create Additional Sources of Income
You can create an active income, but you will have to trade your time for money. An example of active income is offering freelancer services or driving for a rideshare company. Passive income, on the other hand, is when your money continues to grow even while you are asleep. This can include trading, investing, real estate, or being a content creator or affiliate marketer.
Fun Fact: A high-paying job isn't the ticket to financial freedom, as many people might believe. Individuals with more income tend to spend more rather than saving for their future.
8. Contribute to Retirement Accounts
Plan your future. Contribute to your 401(k) or retirement account to maximize your earnings. Start planning for the future early because the earlier you start, the more you can save.
Invest in real estate and the stock market. Become knowledgeable about trading stocks. There is a possibility to trade your way to financial freedom or to get there through long-term investing.
Also, invest in yourself. Take classes, learn a trade, and attend workshops. When you invest in your future, you can even think about creating generational wealth for your family members in generations to come.
Keep these steps to financial freedom in mind as you work toward your goals and spend more time doing the things you love.
Fort Hays State University