Many financial advisors talk about “financial freedom” and how to get it. But what financial freedom looks like can vary from person to person. For some people, financial freedom means having a mansion on a hill and millions of dollars. For others, it might mean simply being able to afford the occasional car or appliance repair without having to borrow money. And for still others, it might mean leaving your current job to pursue ministry or other meaningful work. Here are some tips to help you find your financial freedom.
1. Set your future goals.
Whether you’re dreaming of a luxurious lifestyle or a little cottage in the woods, it’s important to know your financial goals so you can plan to reach them. Think about what you’d like to be doing five, ten, or twenty years from now. This will help you to form an idea of what you’ll need.
2. Know where your money is going.
Whatever your dream for the future, you won’t reach it if you don’t have a solid budget in place. Whether you use an online budgeting app or good old-fashioned pencil and paper, you need a budget. This will help you to track your income and expenses. Once you know where your money is going, you can tighten up any budget leaks. Then, you can create some margin for yourself: money you can put away towards savings.
3. Have an emergency fund.
Whatever your future goals, you need an emergency fund (Read Why You Need to Save Now) in case of any sudden expense like a car repair or hospital visit. Having a fully-funded emergency account is a fantastic step towards financial freedom. An emergency fund can help you avoid going into debt in case your refrigerator breaks down or your dog needs surgery.
4. Reduce your debts.
One of the biggest hurdles to building financial freedom is having too much debt. Once you’ve figured out your budget, you can tackle any debt you have. You might want to start paying down either your highest debt or your highest-interest debt first. If you pay faithfully and try to put every extra dollar in your budget towards your debt, you’ll see results that will get you closer to the financial freedom you want.
5. Invest wisely.
Part of planning for financial freedom is planning for the distant future. If you don’t already, you should think about starting a retirement savings account. The younger you start saving for retirement, the more time you’ll have to benefit from compound interest. Given enough time, compound interest can turn modest savings into a nice nest egg for your golden years. And besides your retirement account, you should seek professional counsel to explore your other investment options.
In order to reach your version of financial freedom, you’ll have to decide what it means to you. These tips can help you decide where you want your financial future to go and give you the inspiration to get there.
This article should not be considered legal, tax, or financial advice. You may wish to consult a tax or financial advisor about your individual financial situation.