In a perfect world, no one would have credit card debt and would be able to live comfortably without worry. Unfortunately, for most people, that usually isn’t the case. Most of us have debt and are not financially free.
Reaching financial freedom means you no longer have to worry about earning enough money to pay your bills, and you’re able to life the lifestyle.
Here’s what you need to do to achieve financial freedom:
What is Financial Freedom?
Financial freedom is more than simply having enough money. Not to be confused with financial independence, financial freedom is about having choices and living the life you want.
For some, it might mean being able to send your children to a private school or taking a summer vacation without worry. For others, it’s starting their own business or paying off the credit card debt in full.
Set Goals
Like most other people, you’ve probably already set financial goals. Some might be short term, like saving for a vacation, while others are more long term such as paying off your home. You need to identify what’s most important to you.
If you want to buy a house in two years or retire in 10, how are you going to make that happen?
While your ultimate goal is financial freedom, you still need to account for the other things you want to accomplish along the way. Creating a solid plan to achieve one goal at a time is the best place to start.
Create a Budget
Once you have clear financial goals in mind, you then need to work them into your current budget. In this manner, you’ll be able to see where your money is going and gauge how much progress you are making along the way.
If you don’t want to track every dollar, you should at least follow a few budgeting rules suggested by Interstate Associates:
- Don’t Spend More Than You Make. You should be spending 50 percent of your total income on needs, 30 percent on wants and 20 percent on debt and into a savings account.
- Cut out unnecessary expenses. Cancel unnecessary subscriptions or internet plans that eat up your savings.
- Add to savings. This should include an emergency fund against unexpected medical bills, repairs and other expenses.
At the beginning of each month, take a look and see if there were any changes to your overall savings or income.
Devise a Strategy
For most people, outstanding debt is the main obstacle in their pursuit of financial freedom. You may find yourself putting a family vacation because you need to pay on your credit cards instead. Finding ways to pay down and then eventually pay off debt is what you need to do.
Any payments towards debt need to factored into your budget. In addition, the way you make these payments is equally important. Some of the most effective ways to pay off debt includes paying off debt with the highest interest rate first, or you can consolidate debt with a balance transfer card, which houses all of your debt on a card with a lower interest rate.
Consider Your Career
Once you figure out how much money you need to reach financial freedom, you then need to examine your income and earning potential. If you’re not, are there any opportunities to make more money at your present job? The answers to these questions play a huge part in reaching your goal.
Ask for Help
If despite your best efforts you still can reach financial freedom, you may need to ask for help. Whether it’s a family member, trusted friend of a financial advisor like the ones at Interstate Associates, there’s no shame in it.