People often say money doesn’t guarantee happiness, and there’s some level of truth to this. However, have you imagined what it feels like to live your life without ever worrying about financial challenges? This is definitely close to having happiness and peace of mind. So, it’s not a bad idea if you are focused on how to achieve financial freedom. It should be one of life’s goals.
Building financial stability to the point where you no longer have to worry about money doesn’t happen overnight. It takes several years of consistent hard work and smart decisions to bring this goal to fruition. To help you live this dream, this post examines the necessary steps to achieve financial freedom.
You probably don’t have a ton of money in your bank accounts right now. But by following the financial strategies and tips explained here, you will get back on track with your money in no time and have the freedom to make choices that improve the quality of your life.
What Is Financial Freedom?
Financial freedom refers to the ability to enjoy a life free from money constraints and limitations. It’s a situation whereby you can confidently spend your income without thinking about paying off debt or maybe going broke.
What Should I Do To Achieve Financial Freedom?
There are several things you must do if you want to understand how to achieve financial freedom. The starting point, however, is attaining a debt-free life. When you are no longer in any debt trap, you can gain full control of your money and invest it towards financial freedom.
Benefits Of Achieving Financial Freedom
Being financially free comes with different benefits. This is why you must be deliberate about getting to this point in your finances. Here are some reasons why you should know how to reach financial freedom:
Achieving Financial Freedom Improves Your Quality Of Life
It’s very difficult to chase your passions and personal goals when you’re struggling financially. Imagine not being able to take your family on a vacation or get a more comfortable home because you can’t afford it.
Achieving financial freedom enables you to live the life you’ve always dreamed of. You can take time off work, focus on your hobbies, and do the things that bring you true happiness. This will eventually lead to a more fulfilling life.
Achieving Financial Freedom Increases Peace Of Mind
Peace of mind is more important than almost anything you can think of. Knowing you are financially stable enough to afford your needs and wants keeps you at peace. You don’t have to panic about late debt payments, rent, water bills, or even emergency expenses. This leads to a more improved mental health and well-being.
With peace of mind, you can freely focus on other areas of your life. You can enjoy quality time with family and friends without having financial worries. It’s one of the most important reasons you must know how to attain financial freedom.
Achieving Financial Freedom Reduces Stress
Financial stress is not uncommon. Many adults have very poor mental health because they are constantly stressed about their financial situation.
When I was in college, I had to face some financial difficulties that made me mentally stressed out all the time. I usually worry about my tuition, feeding, transportation, and other living expenses. By the time I became financially stable years later, I realized how much stress I had suffered in college.
Financial freedom eliminates all the concerns and worries you have about money. You won’t be mentally stressed each time you remember that you are financially secure.
Achieving Financial Freedom Improves Your Relationships With Others
Financial limitations can significantly affect the relationship that exists between you and your family or friends. Having enough money allows you to relate with your family members and friends from a place of comfort.
For instance, having multiple jobs and working overtime to meet up with your financial responsibilities is commendable. But sadly, this could mean that you barely have enough time to be with your kids or spouse.
Having financial freedom gives you the opportunity to build and strengthen the relationships you value.
10 Steps To Achieve Financial Freedom
Want to know what it takes to build a life of financial freedom? Let’s get straight into it!
1. Create A Budget
Budgeting is one of the habits to help you achieve financial freedom. If you don’t plan for your money, there’s no way you can improve your finances. This is why a monthly budget is essential. Instead of wondering how your money was spent at the end of every month, create a plan that helps you track your expenses and curb your spending.
To live on a budget, you have to give every dollar an assignment. This means you have to create different budget lines or spending categories and then spread your income across them. Ideally, your budget should make room for savings and debt payments aside from other essential expenses.
If you are not used to budgeting, you may struggle a little bit in the beginning. This is why I recommend that you check out this post where I discussed the 5 major steps to build a working budget every month.
2. Avoid Debt Completely
If you must learn how to achieve financial freedom, you need to see debt as one of your biggest roadblocks. In a nutshell, you have to attain a debt-free life to stand a chance of becoming financially free.
If you have student debt, credit cards, or car loans, it’s time to start paying down these balances. You must understand that your income is the primary tool for building wealth. But if debt payments keep attacking your income, how would you get to the point of financial freedom?
You have to figure out an effective payoff strategy that you can use to pay down debt faster. As soon as you become debt-free, financial freedom will be achievable.
3. Save For Emergencies
As soon as you make it your goal to learn how to achieve financial freedom, one of the first things you must do is set up an emergency fund.
There are certain unexpected events that happen, taking significant amounts of money from your bank accounts. If you aren’t prepared for moments like this, you could easily go broke or find yourself trapped in debt. This is why saving for emergencies should be a priority.
It’s advisable to have an emergency fund that can cover 3–6 months of living expenses. This way, whenever you have emergency costs to handle, you can resort to the savings instead of taking a line of credit that keeps you in debt.
4. Seize Investment Opportunities
As a salary earner, your paycheck can’t make you rich. You can only save for emergencies and pay your bills. To build wealth that gives financial stability, you have to find a way to grow and multiply your income. This is where investing wisely comes in.
There are several long-term investment options you can tap into to secure your future. Begin by creating tax-favored retirement accounts provided by your employer like your 401(k) or 403(b).
A survey by the National Study of Millionaires has confirmed that 8 out of 10 millionaires took advantage of their company’s 401(k) plan.
If you are bent on figuring out how to achieve financial freedom, you should seize the right investment opportunities around you.
5. Set Financial Goals
During a motivational speech, Denzel Washington said, “Dreams without goals are just dreams.” It’s amazing that you can dream about ways to achieve financial freedom. However, this dream can only be actualized when you set relevant financial goals. Goals such as staying out of debt or building a retirement fund are important milestones to attain financial freedom in the future.
More importantly, you must know how to set achievable goals. Firstly, ensure that your financial goals are measurable. This means your goals should be of significant importance.
Also, put your goals in writing and give yourself a deadline. Attaching a deadline or timeframe for achieving a goal keeps you grounded until what you want is accomplished.
6. Live Below Your Means
Living below your means is one of the important habits to help you attain financial freedom. You must learn to live on less than you make every month. This way, you can avoid debt and develop a sharp mind for managing money effectively.
This requires self-discipline and commitment to focus on only your essentials. This doesn’t mean you shouldn’t desire nice things. However, make sure you aren’t purchasing things you can barely afford just to impress other people. That would lead to debt – one of the biggest hindrances to achieving financial freedom.
Besides, if you would like to learn more about how to live below your means, you can go through this post where I explain the concept and how it improves your finances.
7. Help Your Kids Save For College
As you contribute money every month toward retirement, you should consider saving for your children’s college education by setting up an Education Savings Account (ESA). Your savings in this account are tax-free. As long as you are going to use it to pay for college expenses, you won’t spend a single dollar on taxes.
As of now, you can save up to $2,000 yearly in an ESA for each of your kids. If you don’t want your kids to apply for student loans, you must take this seriously. I believe it’s one of the pro tips for financial freedom.
8. Pay Off Your Mortgage Early
Mortgage can be great since it allows us to own a home when we can’t purchase one outright. However, you shouldn’t spend forever making mortgage payments. That’s a financial constraint that affects your income.
Making an extra payment toward your mortgage could help you complete the payment sooner. Don’t forget that finishing your mortgage payment early means you will save thousands of dollars in interest.
On the other hand, if you don’t have a mortgage and just planning on getting one, I would advise that you choose an option that is within your means. Don’t make the mistake of accepting an overly expensive house just because it looks good.
9. Be Smart About Insurance
What does insurance have to do with learning how to achieve financial freedom? You are not the only one asking this question. I have counseled people who don’t see the relationship between good insurance and financial freedom.
However, when fighting the war against poverty, you need a strong defense. Insurance is the defensive strategy for protecting your finances. One drastic accident or illness can threaten your financial situation, bringing down everything you’ve worked so hard for.
There are 8 types of insurance you need:
- Health insurance
- Term life insurance
- Homeowners/renters insurance
- Auto insurance
- Long-term care insurance
- Long-term disability insurance
- Umbrella policy
- Identity theft protection
Although things like budgeting, saving, and investing will help you succeed financially, insurance is what maintains your financial freedom.
10. Have A Smart Career Choice
Considering the fact that your income is the primary tool for building wealth, you must be smart about your career choice.
Sometimes, you don’t choose a career or job because you are passionate about it. Passion is important, but make sure the job pays your bills and makes it possible to save toward your financial goals.
Before choosing a career, it’s important you ask yourself some vital questions:
- Where would the career take you to within the next 10 years?
- Is the income potential encouraging?
- Does the career have benefits that support your goals?
- Do you enjoy the job?
Answering these questions honestly would give you clarity on what the right decision is. Basically, since you are bent on figuring out how to achieve financial freedom, venture into a career that would facilitate your big dream.
Quick Summary: How To Achieve Financial Freedom
The journey to financial freedom is a step-by-step process. You must be willing to observe each step, track your progress, and appreciate how far you’ve come. Besides, attaining financial freedom on time could mean that you can retire early.
Early retirement might be the one thing that helps you live a satisfying and peaceful life. Except you are very passionate about your career, there’s no point stressing your mind and body over a job you can easily quit.
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