Jun 17, 2025
Financial freedom can mean something different for each of us.
For some, it might simply mean being debt-free. For others, it might entail a comfortable lifestyle. Or it could mean having enough money to pursue your passion, like traveling, writing, painting, or volunteering.
Whatever your definition of financial freedom is, getting rid of money worries requires a long-term plan. And the discipline to follow it. This article will give you some tips to help you define and pursue your financial freedom.
Financial freedom means having enough savings, investments, and cash to live without worrying about money. Your definition of this freedom, or financial independence, will depend on your current financial situation, desired lifestyle, and future goals.
The journey to financial freedom starts by defining your long-term goals. Ask yourself if you want to first cut your existing higher-interest debt, if there are any big purchases you hope to make, or if you have a dream retirement scenario that you aim to achieve.
Remember long-term financial freedom is different from more immediate financial stability. A strong financial position is something you’ll want to achieve as soon as possible. But your financial freedom goes well beyond addressing the here and now. Financial stability now can help you gain momentum on your path to financial freedom and your other financial goals.
By understanding what’s most important to you, you can determine what financial freedom means. You can also establish clear goals. A realistic budget could be the next vital step along your journey.
A budget is a spending plan that accounts for your income, expenses, and goals. It’s designed to serve as a roadmap to help you reach your financial destination. That's why it's important create a budget that works for you. You could get started with these first steps:
Start by getting a firm grasp of your spending habits. Some expenses are fixed, like your mortgage, rent, or car payment. Other expenses might be optional, like what you spend on entertainment, travel, fitness, or dining out.
Compare your monthly income to how much you spend each month. This will allow you to establish a baseline understanding of your current financial situation.
Once you know your income and expenses, you should be ready to choose a budgeting strategy that works best for you. One example is the 50/30/20 rule, which suggests allocating your after-tax income across three broad categories: 50% to needs, 30% to wants, and 20% to savings and debt repayment.
Reducing your fixed expenses could take time and involve major changes to your lifestyle, but it might be worth doing to support your quest for financial freedom. For other expenses where you have greater control, it can be helpful to review your spending habits for a better idea of where you can save.
Remember that a budget is not set in stone. You can adjust it as needed and still stay on track to achieve your goals.
A key step on the path to financial freedom is creating a plan to pay down your debts quickly. The amount of debt you carry can be a barrier to reaching your goals.
This might be especially true if you’ve accrued higher-interest rate debt or debt with steep fees like payday loans or some credit cards.
To help pay down debt fast, you should first know what you owe and how much you’re paying in interest and fees. When you lay out each debt and the interest rate you’re paying, your repayment priorities should be clear. Then, there are a number of actions you might consider, like trimming your expenses, paying more than the minimum on all of your balances, and avoiding adding any new debt.
A personal loan for debt consolidation could be part of your solution. With a fixed interest rate and repayment term, consolidating debt could help you save money on interest today and in the long term. In fact, 93% of surveyed debt consolidators said they saved money or time by taking out a Discover® personal loan.*
Saving and investing are crucial aspects of the path to achieving financial freedom. With every paycheck, focus on putting money into your savings and retirement accounts. This is the 20% part of the 50/30/20 rule.
It helps to be intentional about saving. Try to regard these accounts as you do regular monthly bills. In other words, don’t treat saving as an optional expense category that you only fund with leftover money.
To help make saving easier, consider setting up direct deposit from your paycheck so a part of it automatically goes into a savings account. Or you can schedule automatic debits directly from your checking into your savings account.
If available, you can take advantage of any retirement savings plans offered by your employer, like a 401(k), which deducts pretax dollars from your paycheck. Many employers also match your investment amount up to a certain percentage. It can accelerate your savings. But the best part is that this is another set-it-and-forget-it approach. This money never hits your bank account, so you won’t be tempted to spend it. If you don’t have a 401(k) available, there are a variety of individual retirement accounts (IRAs) that you might want to consider.
For detailed advice and insights about savings and investment strategies, including your 401(k) and IRA, you may want to speak with a financial advisor.
Maintaining a healthy credit score is another key to successfully achieving financial freedom. A strong score may help you get approved for loans such as mortgages, car loans, and credit cards with favorable interest rates.
It's a good idea to regularly check your credit score. If you’re unhappy with where your score stands, there are ways to improve it over time. These might include lowering your credit utilization ratio, building your credit history, and paying your bills on time.
An emergency fund is a cash reserve separate from your primary savings. These are funds that you’ve specifically set aside for unplanned expenses or financial emergencies. These might include car repairs, sudden damage to your home, or unexpected medical bills.
Surprise costs have the potential to derail your plan for achieving financial freedom. By establishing an emergency fund, you may be prepared for the unexpected and stay on track with your goals.
The amount of money you need in your emergency fund depends on your personal situation. But, if possible, you should aim to have three to six months’ worth of living expenses in reserve.
Financial freedom is all about being in control of your finances instead of being controlled by them. No matter what your definition of financial freedom is, achieving it requires long-term discipline and dedication.
The path begins with a proactive mindset and a comprehensive plan. When creating your plan, be mindful of the steps involved. Remember, no matter what your definition of financial freedom is, there are always ways to help improve your long-term financial health.
Ready to begin your journey? See what benefits a personal loan for debt consolidation might provide you on your way to achieving financial freedom.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover, a division of Capital One, N.A., (Discover) or its affiliates.
Discover, a division of Capital One, N.A., (Discover) does not sell non-deposit investment products (“NDIP”) or provide recommendations regarding NDIP. NDIP are NOT FDIC insured .
*ABOUT SURVEY
All figures are from an online customer survey conducted in September 2024. A total of 736 Discover personal loan customers were interviewed about their most recent Discover personal loan with 546 of them using the funds to consolidate debt. All results @ a 95% confidence level. Respondents opened their personal loan between January and July 2024 for the purpose of consolidating debt. Agree includes respondents who ‘Somewhat Agree’ and ‘Strongly Agree’.
