How Do I Achieve Financial Freedom?
[5 min read] Curious about how you can achieve Financial Freedom? Read this Qilo News article to unlock the secrets to Financial Freedom!
It’s probably the single most aspirational goal you will have in your adult life outside of family and career success, and that is the dream of achieving financial freedom.
While this means something different for each and every person, there is one common theme that ties them all together: Freedom.
Freedom from worrying about bills, freedom from debt, and a general sense of wellbeing are just some of the emotions people attach to the concept and idea of being financially unencumbered.
For some of us, this means the retirement of any and all debts, for others, it means a massive increase in net worth or income.
Whatever your goals, we’ve looked across the Internet, searching for the best methods to help you achieve just that goal.
Because each person’s financial situation is as unique as their fingerprint, we had to think in broad terms.
That means we are looking out for the person laden with debt as well as the person who wants to invest and save more.
You see, there is one common spirit that ties those who are financially successful together and often determines whether you will achieve this much-sought-after freedom or not, and that is discipline.
Discipline, which leads to persistence in and consistency of habits will determine more than anything whether you achieve any amount of financial freedom.
Knowing that, these steps rely upon you to maintain that spirit and, in return, they promise you what you have dreamed about. Here are ten proven steps to achieving financial freedom:
- Develop a Plan
You know what they say: A lack of a plan is a plan to fail. This is certainly the case when it comes to financial freedom. From budgeting to defining what that means to you, you need to have a plan for what you would like to get out of life and how you want to live. Cash versus credit cards, cutting back versus splurging, and maxing out your retirement or buying a bigger home are just some of the questions (and temptations) you might face.
This is why it helps to have a plan and a defined set of goals that you can fall back to when times become tough. Especially helpful if you are doing this as a team with your spouse or partner, a plan makes sure everyone comes together and recommits to what they outlined. The single biggest thing that derails roadmaps to success are temporary, short-term problems or needs that call into question long-term goals. Don’t let that happen to you.
- Begin Saving Money
This might run contrary to many debt retirement programs, but we suggest that you begin saving some amount of money, consistently, and now. It doesn’t matter how little it is. It doesn’t matter if you don’t see the point. The goal of this step is to develop the habit of saving and to make it a regular part of your life. We suggest setting aside a small amount from each paycheck as soon as you get it to start.
- Retirement Savings
Similar to saving in a general sense, you also need to consider saving whatever you can for your retirement. If you are employed and your employer has a program, this is even easier for you to do. You might even be able to take advantage of some free money through an employer match or contribution.
Don’t leave this money sitting on the table and don’t worry if how much you are putting away now isn’t a lot. Like with the above suggestion, the goal is to get you to start actively thinking about saving and long-term planning. There’s no better way to do this than to start considering in an earnest way what you will need in retirement.
- Retire Debt
The amount of money you spend on interest payments and other fees to service your debt is money out of your pocket that goes towards no good purpose. Develop a plan to retire your debt (there are several strategies for this) and make it the core of your financial strategy until they are all eliminated. Our advice to you is to live as debt-free as possible, but we understand things happen. Perhaps setting a fixed amount of unsecured (credit card) debt or agreeing to only take on what you can pay off every month are good rules of thumb if you don’t want to shun this kind of spending entirely.
Once you have retired your debt (or cut it to an acceptably low level), you need to use the money you save from that to invest in your future. This could be retirement, for your child’s education, or just investing and saving to do that. Whatever the reason, all of the money that you are not spending to pay back a debt needs to go towards building nest eggs, safety nets, emergency funds, retirement funds, and more. Never tire of saving no matter how much you have put away.
- Pay for Major Purchases with Your Own Cash
We’re now at the point where most major debts like student loans, a car, or unsecured credit card debts are retired and gone. Now we get to one of the major reasons you need to save all of that cash - and hopefully invest it. We suggest that, moving forward, you pay for major purchases with cash. No more financing and no more special limited-time offers.
For many people, being able to pay for what they need - and even what they don’t need - with the money out of their own pocket is considered financial freedom. We consider it an aspect of financial freedom, but one that is critically important. You need to work towards this goal and we advise you to delay major voluntary purchases and the like until you can pay for them yourself.
- Pay Off Your Home
You might notice that we didn’t include your house in your list of debs to be paid off immediately. That’s because your home is not only a debt, but also a utility. Regularly servicing your loan agreement is understood to be part of the game and we’re not going to put any undue pressure on you to eliminate this right out of the gate. But, once you have retired your other debts, you will want to seriously consider eliminating the mortgage on your house if you have one. This can be considered killing two birds with one stone, as well. How so? When you pay off the loan on your house, you increase your equity stake in the house or the amount of money that is “yours” should you decide to sell it right this moment. In this way, paying off your home is like a savings program or an investment scheme.
The main reason financial advisors shy away from you not looking at your primary residence this way is because it is a necessity and provides a utility, shelter. It does not, in its strictest sense, act as an investment vehicle though people have drawn similar benefits from the purchase and sell of a home as they would have with a successful investment. When you’ve got your ducks in a row and you want to be totally debt free, we suggest saving the biggest and the best for last and that should be your mortgage.
- Max Out Other Savings
One theme you’ve probably noticed from these steps is an accelerating process towards saving more and more as you age and retire more debt. This is by design. As you get older, you will need more money. Your wage-earning abilities should increase with age, but this isn’t a guarantee.
The one universal truth we do know is that life becomes more expensive the older you become. This is why retirement and medical expenses come into the fore the older you get. These are your largest expenses and two of your biggest incentives to save, invest, and retire debt now rather than have to do that later when all of your expenses are much higher.
- Never Stop Learning
Things change and you should keep up with them as they do. We encourage you to always engage in financial education and be involved in your financial life as you age. No matter where you are on this set of steps, you should never be afraid to say that you “don’t know” and see the advice of an expert. Life is certainly a learning process, but that’s a train that never stops. Don’t think you know it all because you knew it pretty well years ago.
- Monitor Your Progress
Keep track of your progress in a journal and try to establish benchmarks for success. This can be somewhat tough in the beginning and could even lead to discouragement yet, once you’ve gotten the basics down, we really think you need to incentivize yourself with a goal-oriented approach and nothing helps that like keeping track of everything.
Having a plan provides a range of benefits when it comes time to question what you are doing, but metrics provide you with reasons to keep believing on a regular basis. As with most of these pieces of advice, the goal is to make you stop and consider what you are doing. The root of financial chaos is impulse, and nearly every piece of advice (this one included) is geared towards curbing that drive and turning it into something else - a desire to save.