For most people, gaining financial freedom is a goal that challenges them to strive for the best things in life. But isn’t it surprising to hear that 44% of American citizens lack the cash to cover them for a $400 emergency? This is an indicator that big goals do not come on a silver platter, and you have to work for them. After all, your financial future is as sound as you plan towards it. Are you worried about increasing family responsibilities, financial emergencies, and rising uncertainties? Here are ten sure fire tips that could easily place you on the path to financial freedom.
Set some goals
Financial freedom (or independence) means different things to different people. While the general idea of financial freedom talks about making enough money to support your living expenses without being dependent on employers, you may want to create your own definition of the construct. The fact is that financial freedom does not necessarily mean being wealthy like Amazon’s Jeff Bezos. You can expand the definition of financial freedom to represent much more significant economic accomplishments. However, try not to chase vague goals and set specific financial targets instead. For example, you can state how much money you want to be earning at each phase of your lifespan, as well as your dream lifestyle. The more specific financial targets you can set, the higher the odds of you gaining your financial freedom.
Create an automatic savings account
It is a wise idea to start paying yourself when you are thinking about gaining your financial independence at a young age. You can enrol in a retirement policy and start contributing to your future. Having an automatic savings account can improve your savings habits if you have been struggling with wasteful spending. It is also a laudable idea to set up automatic contributions towards your brokerage account or any other account of that sort. The ideal way to make your automatic contributions is to pay yourself as soon as you receive your paycheck. When you wait any longer, there is the temptation that you could end up spending it on impulse buying.
Start investing now, not later
According to historical facts, there is no better way to gain your financial freedom than making early investments. After all, the early bird always catches the worm. Although unpredictable stock markets can make you think twice about investments, it turns out there are still numerous investment opportunities you can consider. Investors find it easy to realize their financial independence because they make smart decisions while focusing on the bright side of life. Consider opening an online brokerage account that motivates you to invest more. This way, you can also manage your portfolio and learn more about the art of investing.
Generate passive income
Nowadays, financially independent people do not work for money, but instead, allow their money to work for them. The faster you can let your money work for you, the better your chances of escaping the rat race. And sooner or later, you will live a life devoid of financial worries. In the long run, your financial independence can translate to a longer lifespan since your stress levels will reduce to the barest minimum. Statistics show that for every $1 you earn through passive income, it is worth $10 gained by trading your time.
Some even believe that generating passive income is the ultimate path to securing your financial resources. Since time is not always on your side, it is not a bad idea to start finding ways to maximize your earnings while minimizing your working hours. According to a seasoned investor like Warren Buffet, he believes in making money while he sleeps.
Avoid bad debts
Indebtedness can keep you in a black hole of financial constraints, and according to Forbes, 43% of student loan borrowers are struggling to pay off their debts. Until you can steer clear of bad debts, financial freedom might seem almost impossible. For example, credit card debts or student loans can mar your efforts to build a resilient bank account, especially if your earnings are negligible. Payday loans, short-term bank loans, and credit card debts may come with insane interest rates. These can later lock you down in a cycle of poverty, and it is worse for you if your earnings are inadequate.
Invest in good debts
Not all debts are bad; there are necessary debts and good debts, depending on how well you can control your urges. We don’t always anticipate what happens in life, so sometimes, you may need a personal loan to cover a large unexpected expense. An example of a required debt is during emergencies like when your loved one is in custody.
In that case, seeking money to free them becomes necessary. Fortunately, licensed bail bonds agents can provide you with assistance on how to release your loved ones from jail even when you do not have the resources to meet the bail terms. Also, owning a mortgage debt can actually turn out to be a significant investment if you get the right deals. For example, in the United States, where the median price for a home stands around $310,000, you can take a 30-year mortgage plan to acquire your dream house. When this is gotten at a 20% down payment and a cool interest rate of 4%, you may end up paying no more than $532,795 (even plus the interest). This is far better than if you spent that money on rent for 30-years; you will still not own a house.
Try to avoid consumerism
Practicing minimalism is one simple strategy to gain a firm grip on your finances, and it starts with embracing the habit of living within your means. There is a good reason why many wealthy people do not really show off their wealth. To them, investing every penny is smarter than trying to live lavishly. You may also want to follow this example of good financial habits to inch yourself closer to financial stability. One way to save more is to forgo or limit buying fancy things, such as eating in expensive restaurants. A study from the Integer Group discovered that 64% of consumers do not believe that reputable brand names are more important than affordable products. This is an excellent mindset to have if you are trying to build a more financially stable future. Minimalism is that simple to live by — just spend your money on valuable and necessary things.
Good things usually take time to happen. So, you also have to be patient as you implement strategies to stabilize your financial future. While some people tend to want quick money, it is rather patient people who eventually enjoy the fruit of their labor. The fact remains that sustainable wealth takes time to accumulate. So, if you use shortcuts to make your money, you are more likely to lose it all the same way. Of course, there are some people who get lucky, but until you do, it will help to take things one step at a time. Try not to get carried away by the unrealistic portrayal of wealth in the media and focus on your reality. Design your own journey and follow the right principles to build your wealth. When you do that and eventually achieve your financial goals, sustaining your wealth will be much easier.
Be gainfully employed
Unless you just hit a lottery jackpot that can last you for generations, you will indeed have to work hard for an income. This means you need to get a stable job. Your employment status is central to reaching your financial freedom. When you have a reliable job with good economic returns, you can quickly pay off your debts and regain your financial freedom. If your full-time job does not pay that much, look for a side hustle to supplement your earnings. Also, it is alright to quit a low-paying job for a more lucrative offer. As time goes on, your savings can reach a point where you do not have to work so much before you can live comfortably.
Although becoming gainfully employed is key to building sustainable wealth, budgeting is also essential. According to John Bogle of Vanguard, you increase your earnings three-fold, provided you are good at controlling your expenses. The principle of budgeting can be hard to live by. But if you master it, you can quickly pay off your debts and save more. To budget effectively, you will need to make a lot of sacrifices, which means denying yourself some luxury. However, it can be overwhelming, and you can avoid the risk of burning out by designing a flexible budget. Good budgeting involves distributing your monthly paycheck to cover your most basic expenses while ensuring that much is left to be saved. This can guard your hard-earned financial resources against wasteful spending.
The bottom line is that while it is easier to talk about wealth, happiness, and financial freedom, doing the work to achieve them is more important. Moreover, the earlier you start taking steps, the better your chances of accomplishing your dreams about financial freedom.