Financial freedom is something that seems so elusive. Recent research from Charles Schwab shows that 3 out of 5 Americans are living paycheck-to-paycheck. Moreover, only 1 out of 4 have a written financial plan. The numbers speak for themselves. Most of us spend a lot of time planning other aspects of our lives. We focus on career development, marriage, building a family, etc. In the end, we fail to build a sound financial plan. We only realize what we took for granted upon reaching old age.
Financial goals are actually attainable. You just have to take the first step, which is to acknowledge the necessity for it. Everything else will then come naturally. You will feel the urge to wipe your debt, start saving more, and eventually, investing in a business as a second source of income.
Here, I will share tips on taking the steps to the financial freedom ladder. Imagine paying off your debt, saving for your future, and living life like you’ve always imagined.
#1 of 7 Steps to Financial Freedom: Have a Monthly Budget
Your first goal should be to stop spending more than you earn. Besides, overspending is what led you to debt. Before the beginning of each month, assume the money that will come in. Then jot down the figures that will go out. If possible, consider paying more than the minimum amount for each debt. Make sure that your income is at least a bit higher than your expenses.
#2 of 7 Steps to Financial Freedom: Start Paying Cash
As long as you have your credit cards in your wallet, believe me, you’ll use it. So, if you are serious about not acquiring more debt, I suggest you literally cut out your credit card. After all, you will still pay it even of you’re no longer using it. When going shopping try going with cash. Cash makes sure you stick to the budget. Studies show that when you use cash it actually triggers the same area of your brain as pain. The same is not done when you use a card.
#3 of 7 Steps to Financial Freedom: Work on Saving your $1,500 Emergency Fund
The next best thing to do is to save for your starter emergency fund. I suggest you work out fifteen hundred dollar savings fast. This somehow gives you a feeling of security knowing that you have something in the bank that you can take out in case of emergencies. Think about sudden roof leaks, your car breaking down, or a family member getting sick. Wouldn’t it be a relief to have these covered?
#4 of 7 Steps to Financial Freedom: Contribute to your 401(k)
Always match your employer’s contribution to your 401(k). As an example, if your employer pays 50% of the first 5% of your contribution, then pay 5%. If they only match 3%, then pay only 3%. This way, you will tuck your 401k neatly while taking advantage of the free money from your employer. If you don’t have a 401(k) yet, it’s time to work this out. I will dedicate another blog post for this topic.
#5 of 7 Steps to Financial Freedom: Tackle your Debt
Create a list of your debt. This includes your credit cards, car loan, student loans, etc. except your home mortgage. List it down according to the amount you owe. This gives you an idea of what to tackle first. Once done with your list, set aside the bigger chunk of your budget for debt payment for your smallest loan. Do this step until you are able to pay your smallest loan completely, then move forward with paying loan #2 and so on.
#6 of 7 Steps to Financial Freedom: Increase your Retirement Savings and Emergency Savings
Now that you are slowly taking control of your finances, it’s time to take your saving habit up a notch. Consider putting 3-6 months of your salary’s worth to your emergency savings. If your income is steady, go for the additional 6 month’s worth of savings. If you earn through commissions or you have a fluctuating income, work out the additional 3-month plan. Whichever the case is, the goal is to put more money in your bank account.
Next, if you haven’t reached the maximum amount that your employer matches on your 401(k), it’s time to contribute more. Think of it as a delayed gratification. You will thank your younger self when you start enjoying your 401(k) come old age.
#7 of 7 Steps to Financial Freedom: Start a Business
By the time you reach this seventh step to financial freedom, you already probably have more extra money. What’s the next best thing to do then? Well, invest in a business! Starting your business might sound like a scary thought, but all it takes is that one courageous step to get out of the ordinary. Check out these business ideas for 2019 for the boost and tips you need.
Achieve Financial Freedom with the Help of A Financial Coach
If you feel overwhelmed with all these steps you have to take, then you might need the assistance of a Financial Coach to get you going. Secure your online appointment with me for a 1-on-1 Financial Coaching Session now and let’s work your way to financial freedom!