How to Master the Steps to Financial Freedom

Steps to Financial Freedom

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You know that feeling of panic that sets into your stomach when you see the bill for an unexpected car repair. How are you going to pay for that? But what if a car repair was just a mere inconvenience? Instead of worrying, you pay the bill without thinking twice and a week later you’ve forgotten it ever happened! That’s what taking the steps to financial freedom feels like. 

Achieving financial freedom can be very difficult in the face of growing debt, cash emergencies, medical issues, and excessive spending, but with discipline and careful planning, it is possible. Being financially independent means having sufficient income, savings, and investments to live comfortably for life, and meet all of one’s obligations without relying on a paycheck. Trouble happens to nearly everyone, but here are some habits that can put you on the right step to achieving financial freedom.

Table of Contents

    What Is Financial Freedom?

    Financial freedom means you get to make life decisions without being overly stressed about the financial fallout of those decisions. That’s because you’re financially prepared for whatever life throws your way, not only do you eliminate debt, but you also have money in the bank, and you’re investing in your financial future. 

    Achieving financial freedom is having enough money and savings, investments, and cash in hand to afford the lifestyle you want for yourself, your loved ones and family is an important goal for many people. a comfortable lifestyle for you and your family, also means growing a nest egg that will allow you to retire or pursue any career you want without being driven by the need to make income each year. 

    Unfortunately, too many people fall far short of financial freedom. Even without occasional financial emergencies, escalating debt due to excessive spending is a constant burden that keeps them from reaching their goals. When a major crisis such as a hurricane, an earthquake, or a pandemic completely disrupts all plans, additional holes in safety nets are revealed. 

    In other words, you determine your personal finances instead of being determined by them. When you practice the steps to financial freedom, you don’t have to wonder if your bank account can handle replacing your hot water heater or buying groceries for a single mom who just lost her job.

    Key takeaways

    • Set life goals big and small, financial and lifestyle and create a blueprint for achieving those goals.
    • Make a budget to cover all your financial needs and stick to it.
    • Pay off credit cards in full, carry as little debt as possible, and keep an eye on your credit score.
    • Create an automatic savings account by setting up an emergency savings or emergency fund and contributing to your employer’s retirement plan.
    • Taking care of your belongings maintenance is cheaper than replacement but most importantly, take care of your health.

    How to Take the Steps to Financial Freedom

    The step to financial freedom isn’t a get-rich-quick strategy. Also, financial freedom doesn’t mean that you’re “free” of the responsibility of handling your money well. Quite the opposite. 

    Having complete control over your personal finances is the result of hard work, sacrifice, and time. And all that effort is worth it!

    Here are the steps to financial freedom today:

    1. Set Life Goals

    Everybody dreams about achieving financial freedom. It’s a great dream! But a dream without a goal is just a wish. That’s why setting financial goals like getting out of debt or saving up for retirement is so important on your journey toward financial freedom. 

    They give you something to work for, which guides your steps toward financial freedom! What is financial freedom to you? Everyone has a general desire for it, but that’s too vague a goal. You need to get specific about amounts and deadlines. The more specific your goals, the higher the likelihood of achieving them. How do you know if you have a good goal to go after? Here’s how to set goals that work.

    Here are some objectives to consider:

    • Be specific.
    • Make your goals measurable.
    • Give yourself a deadline.
    • Make sure they’re your own goals.
    • Put your goals in writing.
    • What your lifestyle requires
    • How much you should have in your bank account to make that possible
    • What age is the deadline to save that expense?

    Next, count backward from your deadline age to your current age and establish financial mileposts at regular intervals between the two dates. Write all expenses and deadlines down carefully and put the goal sheet at the front of your financial binder.

    2. Make a Monthly Budget

    You won’t get ahead if you don’t create some financial planning for your money. Instead, you’ll find yourself wondering where your money went at the end of every month! That’s not how to achieve financial independence, that’s a recipe for financial disaster. 

    To achieve financial independence or financial freedom is impossible if you’re not living on a budget. You’ve got to tell your money where to go, or you’ll end up wondering where it went. Give every dollar an assignment before the month begins and track your spending time throughout the month. If you consistently overspend or underspend in certain areas, you can always adjust the expenses in those categories. 

    Budgeting is important to get your finances on the right track, but it doesn’t end there. Even once you achieve financial freedom, you’ll still complete a unique budget every month. No matter how much money or income you have, you need a plan. 

    No one wins the big championship game by accident, and you won’t get financial freedom by accident either. Budgeting is the first step to financial freedom and building wealth on purpose. Making a monthly budget and sticking to it is the best way to guarantee that all bills are paid, and savings are on track. It’s also a regular routine that reinforces your goals and bolsters resolve against the temptation to splurge.

    3. Pay off Credit Cards in Full

    Steps to Financial Freedom

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    Credit cards and other high-interest consumer loans are toxic to wealth building. Make it a point to pay off the full balance each month. Student loans, mortgages, and similar loans typically have much lower interest rates; paying them off is not an emergency. 

    However, paying these lower-interest loans on time is still important; on-time payments will build a good credit rating and balance. The minimum payment is the lowest amount you can pay on the revolving credit account per month, because making minimum payments will help you to remain in good standing with the credit card company. 

    If you have debt like credit cards, student loans or car loans, it’s time to kick it to the curb. Why? Because if you’re sending hundreds of your income in debt payments to banks and lenders every month, you’ll never truly experience financial freedom. Your income is your most powerful wealth-building tool. And you won’t reach your money goals if all you’ve got to work with are bits and pieces left over after you pay credit card bills and student loan payments.

    Most people feel like they got a raise when they start budgeting, so that’s good news for you. Throw all that extra cash at your smallest debt until it’s gone. Then keep the snowball rolling. Paying off debt is hard work, but there’s nothing like the feeling of keeping the money you bring in every month.

    4. Create Automatic Savings

    Pay yourself first by creating automatic savings. Enroll in your employer’s retirement plan and make full use of any matching contribution benefit, which is essentially free money. It’s also wise to have an automatic withdrawal into an emergency fund, which can be tapped for unexpected expenses, as well as an automatic contribution to a brokerage account or something similar. 

    Ideally, the money for the emergency fund and retirement fund should be pulled out of your account the same day you receive your paycheck, so it never touches your hands. Keep in mind that the recommended amount to save in an emergency fund, depends on individual circumstances. 

    Also, taxes and tax-advantaged retirement accounts come with rules that determine or  make it difficult to get your hands on your cash should you suddenly need it, so that your taxes or tax advantaged account should not be your only emergency fund.

    5. Start Investing Now

    Now that you have a plan for short-term savings, invest in your financial future which could be part of your financial strategy and start saving.  you’re ready to partner with a financial advisor who can help you achieve or make the most of your long-term investment options. 

    The good news is the sooner you start investing, the more money saved must grow. That’s the power of compound growth at work. Bad stock markets known as bear markets can make people question the wisdom of investing, but historically there has been no better way to grow your money. The magic of compound interest alone will grow your money exponentially, but you do need a lot of time to achieve meaningful growth.

    However, remember that for everyone except professional investors it would be a mistake to attempt the kind of stock picking made famous by billionaires like Warren Buffett. Instead, open an online brokerage account that makes it easy for you to learn how to invest, create a manageable investment portfolio, and make weekly or monthly contributions to it automatically. 

    6. Watch Your Credit Score

    Your credit score is a very important number that determines the next highest interest rate you are offered, when buying a new car or refinancing a home. It also impacts the expenses you pay for a range of other essentials, from car insurance to life insurance premiums

    The reason credit scores have so much weight is that someone with reckless financial habits is considered likely to be reckless in other areas of life, such as not looking after their health or even driving and drinking.

    This is why it’s important to get a credit report at regular intervals to make sure that there are no erroneous black marks ruining your good name. It may also be worth looking into a reputable credit monitoring service to protect your information.

    7. Negotiate for Goods and Services

    Many people are hesitant to negotiate for goods and services because they’re afraid that it makes them seem cheap. Conquer this fear and you could save thousands each year. Small businesses tend to be open to negotiation, so buying in bulk or positioning yourself as a repeat customer can open the door to good discounts.

    8. Stay Educated on Financial Issues

    Review relevant changes in tax laws to ensure that all adjustments and deductions are maximized each year. Keep up with financial news and developments in the stock market and do not hesitate to adjust your investment portfolio accordingly. Financial literacy or Knowledge is also the best defense against fraudsters who prey on unsophisticated investors to turn a quick buck.

    9. Maintain Your Property

    Taking good care of your property makes everything from cars and lawnmowers to shoes and clothes last longer. The expenses made in  maintenance is a fraction of the cost of replacement. so, it’s an investment not to be missed. Learn to know the difference between the things you want, and the things you need.

    10. Live Below Your Means

    Mastering a frugal lifestyle means developing a mindset focused on living a good life with less and it’s easier than you think. In fact, before rising to affluence, many wealthy individuals developed the habit of living below their means. In other words, you’ve got to live on less than you make. 

    This goes right along with having a budget. To reach financial freedom, you need to have self-discipline and be willing to say no to some stuff you can’t afford to buy right now so you can save more in the long run.

    This isn’t a challenge to adopt a minimalist lifestyle. It simply means learning to distinguish between the things you need and the things you want and then making small adjustments that drive big interest for your financial health.

    11. Get a Financial Advisor 

    Once you’ve gotten to a point where you’ve amassed a decent amount of wealth either liquid assets (cash or anything easily converted to cash) or fixed assets (property or anything not easily converted to cash) , get a financial advisor to help you stay on the right path. 

    The idea of actively making decisions about your money and investments may feel overwhelming. If it feels that way to you, you’re not alone.

    A financial advisor can help you:

    • Make decisions about your investment strategy.
    • Re-balance your funds regularly to minimize risk tolerance.
    • Create a realistic plan for what and how to achieve financial independence looks like for you.
    • Know what investment options you have beyond retirement accounts.
    • Set up a withdrawal plan for your specific situation.

    12. Get a Whole life insurance policy

    A whole life insurance policy is meant to cover the entirety of your life, not simply to assist family/friends in the event of the individual’s death. As such, the policy is eligible to pay out dividends, meaning it generates a form of income that increases the cash value of the policy over time. But there is so much more you can do with your life insurance policy, even while alive.

    You can use your policy to generate cash flow, clear debt, and build wealth. How? It’s easy. As soon as the policy is active (depending on how it was designed), it possesses cash value that you can take out. You can also take out a loan (using the policy as collateral) to handle unexpected expenses that may arise. 

    13. Take Care of Your Health

    The principle of proper maintenance also applies to your body, and taking excellent care of your physical health has a significant positive impact on your financial health as well. Investing in good health is not difficult. This means regularly visiting doctors and dentists and following health advice about any problems you encounter. 

    Many medical issues can be helped or even prevented with basic lifestyle changes, such as more exercise and a healthier diet. Poor health maintenance, on the other hand, has both immediate and long-term negative consequences on your financial goals. 

    Some companies have limited sick days, which means a loss of income once paid days are used up. Obesity and other dietary illnesses make insurance premiums skyrocket, and poor health may force early retirement with lower monthly income for the rest of your life.

    Recap

    These steps to achieving financial independence won’t solve all your money problems, but they will help you develop the good habits that get you on the steps to financial freedom. Simple financial planning with specific target expenses and dates reinforces your resolve to reach your ultimate goal and guards you against the temptation to overspend

    Once you start to make real progress, relief from the constant pressure of escalating debt and the promise of a nest egg for retirement, kick in as powerful motivators and financial freedom is in your sights.