What is financial freedom? If you ask different people about what it means to them, they’re sure to give you a variety of answers. But a common ground would be being financially stable with debts paid and enough savings. It’s a feeling of having financial security.
When you receive your next paycheck, you’re not just spending it all for bills and debts as there’s a certain amount left for enjoyment and savings. Financial freedom can mean finally getting out of the never-ending cycle of living paycheck to paycheck without a single cent left.
But regardless of what financial freedom means to you, it doesn’t change the fact there are fail-proof steps you can take to bring your financial situation to a better light. Certainly, it won’t happen overnight. But taking one step at a time would eventually set you off in the right direction. Then you’d see you won’t even need to be living on a millionaire’s paycheck to achieve that much-coveted financial freedom you’ve been dreaming of.
Achieving financial freedom would soon be a reality for you with these five easy steps.
Pen Down Your Goals
There’s power in writing, especially when it comes to goal setting. There’s no substitute to seeing your goals written on paper so you’d be reminded of what you want to achieve. Whether they’re big or small goals, short-term or long-term, every single goal matters. They’d serve as your driving force to be smarter about your day-to-day finances so you can slowly tick those goals off your checklist.
You can start this process by asking yourself why you need money and why you want financial freedom. It helps to read through sources like Freeman Publications and other sources you can flip through. And from there, you can begin writing down your goals. Until you’ve accomplished this, your money may lack a sense of purpose, which may only heighten your chances of spending recklessly.
For your goals, you can perhaps include the following:
- Starting an emergency fund for situations like medical expenses, car repairs, or temporary job loss;
- Saving for retirement so you can still live comfortably even when you no longer have a monthly flow of income coming into your account;
- Paying off your car faster than the set time so you won’t have to be stuck paying for high interest rates.
Live Well Within Your Means
Living well within your means suggests you aren’t merely living within the limits of what you can afford but you’re living well, happy, and comfortably without exceeding your budget. It’s about enjoying a few of the things you want here and there, but not at the expense of falling into debt.
Committing to living well within your means is one of the most overlooked steps by people who want financial freedom. But it’s one of the easiest and most effective ways. By living well within your means, you aren’t ranking up debt after debt and buying things you don’t really need.
To start this kind of lifestyle, here are tips that can steer you toward it:
- Track your living expenses so you know every single bit of where your money is going. If there are areas in your expenses you feel you can improve on, you can also start making changes in that area.
- Increase your income. Do it not to increase your spending but to save more and enjoy more without getting into debt.
- Educate yourself about passive income. Start small and try money-making apps like Honeygain, since it doesn’t require any initial investment, later on you can find more impactful sources to generate passive income.
- Don’t rely on credit cards. Use these only for emergencies. Whenever you go out, make it a point to bring only cash with you. By doing so, you can make it a habit to pay with cash as much as you can.
Track Your Spending
Tracking your spending is like having a budget. This is important so you can have a document to look at that tells you where your money is going each month. You’d have the sense of accountability, just to give yourself that assurance you aren’t spending your money mindlessly.
The best way this method can give you more financial freedom is by making you feel more accountable. It can reveal any excessive and impulsive spending you may have been making that isn’t contributing to improving your financial situation at all.
There are many ways you can track your spending. If you’re an old-school type, writing your expenses each month would work. If you’d rather make use of technology, there are apps for that purpose, too. Or you can’t also go wrong with a spreadsheet program.
Set Up A Fixed Deposit Schedule
Setting up a fixed deposit schedule and amount is one fail proof way to ensure you always deposit a fixed amount every month. No matter how small it is, it still counts. Even in months when it may be challenging to deposit a fixed amount, just make it a point to put in something. Little is always better than nothing. For instance, you can set up an automatic transfer schedule from your bank account where your salary comes into other fixed savings accounts you may have.
Your goal to achieve financial freedom should be coupled with the mindset ‘money saved is money earned.’ Don’t be too hard on yourself if you can’t go shopping with your friends this month because you made the wise decision to double your car payment for this month. You can always go shopping the next month when another end-of-season sale is underway.
But spending less doesn’t also mean living a bare-bones life. It’s simply cutting down on any expenses you know aren’t necessary so you can put more effort into your goals or long-term financial security.
With the steps above, you can be one step closer to achieving financial freedom or having full control over your finances. You can live the life you want without fear of debt payments or having enough money to pay for emergencies. The tips above aren’t drastic changes, however, as you can’t do it all at once. Especially if you’ve still got debts to pay, you need to get those in order first. Then take it one step at a time.
These may only seem like easy steps, but they’re fail proof in helping you achieve that dream financial situation of yours. It’s not about having lots of extra money. It simply means making wiser financial decisions so you don’t have to live paycheck to paycheck as you may do now.
Author: Jacob Hudson is a financial advisor. His job includes helping individuals and businesses alike to achieve their financial goals. By setting up his own firm, he’s able to achieve his own financial freedom as well. When he’s not talking about finances, he enjoys going to the beach with his wife and three children.