What is financial freedom?
Some people associate this with the ability to stop living paycheck to paycheck. For others, it’s all about having enough money in the bank to do what they want (when they want).
Financial freedom means something different to everyone and once you understand your definition of it, it’s time to implement a plan for helping you reach this goal.
It may not be easy. It may not be fun. And it may frustrate you at times. However, if you stick with your plan, you’ll look back in the future and realize that you made a good decision.
With that out of the way, let’s examine five tips anyone can use on their path to achieve financial freedom:
- Create a Budget
Did you know that less than half of Americans use a budget? That’s a huge number. Are you part of this group? Without a budget, there’s no way of knowing exactly how much money you’re earning and spending each month. Conversely, it’s a challenge to reach financial freedom in the most efficient manner possible. Fortunately, creating a budget is easier than ever before. If you don’t want to use a pen and paper system, you can opt for one of the many budgeting and personal finance apps designed for consumers like you. Creating and following a budget can be an adjustment, but it’s one you need to make.
- Rid Yourself of Debt as Quickly as Possible
There’s a good chance unnecessary or high-interest debt is what’s holding you back from reaching financial freedom. Some 80% of Americans have at least one of six different types of debt. Don’t set the goal of paying off your debt at some point in the future. Set the goal of paying off your debt as quickly as possible. Once this happens, you’ll find yourself closer to financial freedom than ever before.
- Pay Yourself First
You’ve probably heard this saying in the past, but you may not know exactly what it means.This has nothing to do with how you earn your money, but everything to do with your approach to savings. In short, paying yourself first means prioritizing putting money into your bank and retirement accounts. Tip: don’t look at funding your bank and retirement accounts as something that’s optional. Instead, consider it a bill that needs to be paid, no matter what it takes.
- Change Your Spending Habits
It can be fun to spend money just as fast as you earn it, but this approach is sure to lead you toward an uncertain financial future. Does this mean you should save every bit of money, never taking time to enjoy yourself? Not necessarily, but what it does mean is that you should review your spending habits for a better idea of where you can save. Are you overspending on dining out? The average American spends approximately $2,800 on restaurant meals and takeout every year. This works out to $233/month or just about $8/day. Are you spending entirely too much money on rent? How about your car payment? What about travel and other entertainment expenses? You get the point. You can spend your money in many ways, but some expenses can stop you from reaching your financial goals. As you reduce or eliminate these, you’ll find yourself breathing a sigh of relief and taking a big step forward.
- Dream Big
You shouldn’t be afraid to dream big. It’s okay if you want to retire by age 40 (and you’re already 35) and live in Hawaii. It’s okay if you want to bank $1 million. Dreaming big gives you the motivation you need to push forward, day in and day out. Even if you fall short, there’s a good chance you’ll still be happy with where you end up.
Let these five tips guide you as you strive for financial freedom. The right strategy, combined with persistence and dedication, will have you making progress in no time at all.
- Create a Budget