Financial freedom might sound like a big dream. But in reality, the truth is something else. You can quite easily achieve financial freedom if you really want to.
How much you are eager to become financially free? Does financial freedom sound difficult to your ears? What if you could actually become financially free?
If you’re like many Americans, you’re currently living paycheck to paycheck with almost no savings and with lots of credit card debt or payday loan debt.
Make no mistake, financial freedom is quite a lofty goal, but it isn’t unreachable. If you decide to achieve financial freedom, there are a number of financial freedom tips that you can implement in your life, including a few that worked for me.
Follow these simple tips to start working toward your financial freedom today!
1) Build an emergency fund
Building an emergency fund is one of the most important ways to achieve financial freedom.
Nearly 70% of Americans don’t have $1,000 as an emergency fund in their accounts. So, having a security fund to tackle any financial crisis is important for your financial well-being.
You may save 3 months of expenses or 6 months of income, whichever is suitable for you. Make sure you don’t save that money on your checking account, don’t worry about the interest rate.
2) Make a new budget every month
It’s time to get a spreadsheet and do the math. Talk to your spouse and prepare a solid monthly budget. Remember, consider your income, ignore the expenses.
Try to categorize your expenses as per the priority. Avoid overspending at any cost, it will help you to avoid debt in the first place. Focus on fixed expenses, and try to allocate money to that category first. Do not ignore debt payments, make sure you pay them first.
3) Pay off consumer debt
This is one of the most crucial jobs that you should never forget. You may get out of debt if you spend less money. If you have existing debt, you can apply a few debt payoff strategies.
Make a list of all your debts, leave your home mortgage alone, as it is a secured debt. You can add car loans, credit card bills, student loans, and other unsecured debt. You can arrange the debts as per their interest rates, or the debt amount.
There are two main methods of paying off debt: snowball and avalanche. Snowball is when you pay off the smallest debt first. Avalanche is when you pay off the debt with the highest interest rate.
You can consolidate your debts and reduce the interest rate. One of the most popular credit card debt pay off strategy is balance transfer method.
4) Track your spending
This is also an important tip that can help you to get financial freedom.
You can use online tools such as Mint to track your spending. You should also check your accounts, and how much debt you have. It may give you a sense of control over your finances. Apart from that, it will also give you the confidence to manage the financial changes in your life.
Tracking your spending literally reduces overspending. The more you can save, the more you may spend on an emergency.
5) Review your insurance policies
If you are a permanent employee and work full time, your employer’s group plan may provide you most of the insurance benefits you are expecting. But you may also check yourself if you feel that given insurance coverage is not enough for you.
Many workplace benefits insurance coverages include disability insurance. You may replace at least 60% of your after-tax income if your insurance policy doesn’t work that way.
The ideal coverage you should get from your life insurance is 10 times your income if you have kids under 10 years old.
6) Stay away from further debt
Zero debt is the key target of being financially free! After paying off your debt using popular debit payment strategies, like debt consolidation or debt settlement, your finances will be more or less on the track. Now, this time if you again start incurring further debts, it won’t be a good decision.
You should concentrate on saving rather than spending as much as possible. Try to use cash instead of credit cards. It’ll help you to lower your spending and to control impulse buying. Set autoplay option in your credit cards so that you don’t miss a single credit card bill payment any month.
Last but not least, do not take out a payday loan.
7) Contribute as much as possible in a retirement savings account
Contribute to your 401(k) to maximize the employer match. Usually, your employer will match your 401(k) contribution up to a certain level.
Increase your savings by lowering your expenses, and contribute the surplus into your retirement account. You may take out a loan from your retirement account, but make sure you pay it back with the period.
If you are not eligible for the 401(k) plan, a Roth IRA (if you are eligible) will do your work. You might also opt for a traditional IRA if you are not eligible for the Roth.
Building a solid nest egg before retirement is one of the steps of financial freedom!
8) Create additional sources of income
If you’re serious about financial freedom, you need to focus on side hustles apart from your 9 to 5 regular job.
Here are a few side hustles you can choose to earn actively:
- Become a freelance writer or start your own blog
- Provide virtual assistance online
- Become an Uber driver
- Teach part-time in a school
- Provide music classes
- Pick up the odd, occasional job on Craigslist
- Start buying and selling a business, etc.
9) Pay off your mortgage
Once you have paid off your unsecured debts and invested 15% of your income toward a retirement fund, start thinking about your mortgage. You should pay off the mortgage as soon as possible.
You may talk to your lender and ask for a refinance option. This time you should seek a lower interest rate and shorter repayment time. This way you can save on the interest as well as you can pay off the loan quickly.
10) Diversify your investments
No one knows what will happen in the future. So, it is wise to protect yourself against unexpected crisis by diversifying your investments across multiple asset classes.
You should invest in stocks, fixed-income investments, peer to peer lending, natural resources, and real estate. This way you may sustain from the big hit in the future if the financial market trembles or crashes.
Financial freedom can help you take control of your finances and your life. Being financially free means living within your means without making any wrong financial move. Make sure that your money is going in the right direction and creates more money.
By following the above-given tips, you may find the right path to reach your destination. But remember, how to walk that path and get to your destination, it’s all up to you. One wrong move is taken, and you are out of the game!
Don’t worry! Take a look at those tips, build additional resources to earn, pay down your debt, and become financially free! Best of luck.
Patricia Sanders is a financial content writer. She is a regular contributor to Debtconsolidationcare. She has been praised for her effective financial tips that can be followed easily. Her passion for helping people who are stuck in financial problems has earned her recognition and honor in the industry. Besides writing, she loves to travel and read various books. To get in touch with her (or if you have any questions regarding this article) email her at [email protected].