Let’s be honest -everyone wants to reach financial freedom and become rich, and I am here to tell you that you can!
Finances are an integral part of our lives as adults: from making sure you have enough money to pay bills and buy necessities, to planning for retirement and long-term financial stability.
Here we’ll list the 7 best steps people take to achieve financial freedom, including demolishing debts and planning your future.
What Does Financial Freedom Mean?
Financial freedom means different things to different people, and none of them are wrong if they fit your goals in life.
Many people define that freedom as having absolutely no debt or paying off debt steadily and having money left over for fun.
Overall, most people feel it’s breaking the cycle of living paycheck to paycheck by having a high-income job and plenty of money in the bank.
Regardless of what financial freedom means to you, the concept remains the same: financial freedom simply means being able to do what you want without having to worry about your finances.
7 Steps For Financial Freedom
Once you know what your financial freedom is, it’s time to start working on achieving it.
There are many ways you can make improvements, from making changes to your spending habits to paying off debt to planning investments that will help you achieve financial freedom faster.
1. Understand Your Current Finances
The first step to financial freedom is to figure out where you are now in terms of your money/wealth.
Create a budget and track your finances for at least a month or two to see where your money is going. Once you get used to following a budget, it becomes easy to create one each month and save up cash on hand.
You can also use an app like Albert to manage your finances and get an overall view of how you’re going with your money. Read more about the Albert App here!
A Genius bank account like no other! Get paid faster. No hidden fees. Save and invest automatically right from your paycheck.
Savvy Tip: Instead of trying to make your own budget template, use one that has been created for you!
2. Demolish Your Debts
Your credit score is also important to determine your current financial situation, and is heavily influenced by your debts.
Get your free credit score at Credit Karma to see where you stand. If you have good credit, you’re probably in a better place to make financial decisions.
But even if you have bad credit, don’t worry – there are still ways to improve it and reduce your debt.
If you’re struggling with debt, it’s important to focus on paying it off to gain financial freedom.
Once the debt has been paid off, you’ll be able to save and plan for other financial goals.
If you’ve been making your payments on time, you might want to consider transferring your balances to a credit card with a lower interest rate.
Also, remember that it’s important to know how to use your credit card properly!
Pay more than the minimum balance on your credit cards. This reduces the amount of interest you pay over the life of the credit card plus it gets it paid off quicker.
If you can’t get a credit card, consider using Credit Strong to get revolving credit. Learn more about how they can improve your credit score in our Credit Strong Review.
3. Establish New Goals
Think about why you need money- the reasons you want financial independence- and how much money you need to achieve it.
- Is it for a car or a house?
- To support your family?
- To pay off student loans or get rid of credit card debt?
Once you know why you need money, set financial goals that are realistic and achievable.
Short-term goals are things that you want to accomplish in the near future – like buying a car, paying your insurance for a year, saving a certain amount of money in a year, or paying off debt.
You may have to make decisions based on your goals- like using extra money to pay off your mortgage or investing to gain more wealth.
Long-term goals are things that will take more time and effort, such as establishing an emergency fund and saving for retirement or investments in real estate or Robo-advisors.
Here are some online investing platforms we think you should check out:
- M1 Finance– they offer premade pies for investment portfolios and is fully automated to invest for you
- Betterment– a robo-advisor takes out the guesswork and makes investing hands-free
- Robinhood– invest in cryptocurrency with no trading fees
- Webull– it’s better for experienced investors, but offers 2 free stocks to start you off with free money!
4. Create New Financial Habits
Creating new financial habits and avoiding lifestyle inflation will help you achieve financial freedom.
Adopt a Frugal Lifestyle
Frugal living simply means living below your means, not lavishly but comfortably. Being frugal doesn’t mean you have to give up the things you love – it just means paying attention to when and how often you’re spending money.
Following a budget and cutting back on dining out or grabbing coffee on your way to work are prime examples of frugal living habits.
You can also find ways to cut back on groceries, from creating a meal plan to looking for deals and coupons.
Cultivate a Positive Money Mindset
A positive money mindset is keeping your focus on money goals, knowing money is neutral and not your enemy, and believing you are capable of making money for your goals.
Practice positive money affirmations to rethink how you feel about money- being more good vibes into your life and the money will follow!
Once you’ve established the proper mindset, you can start changing your habits like using cash instead of credit cards whenever possible or not buying things until you save money to pay for them.
Start an Emergency Fund
Starting an emergency fund is important so you don’t rely on credit cards and increase your debt when something unexpected comes up.
Emergency funds are cash savings set aside in case of problems, separate from your regular savings and personal bank account.
Cut Out Unnecessary Spending
Spend Less on groceries, cable, internet, phone, and eating out by meal planning, going grocery shopping less often, and cooking food at home.
Use an app like Trim to negotiate new rates on your cable, internet, and phone- you can even use it to negotiate your medical bills.
Apps like Honey, Rakuten (formerly Ebates), and Ibotta can help you find discounts on your everyday purchases.
5. Reconsider Your Career Path
Perhaps it’s time to look into starting a new career path that offers higher pay or different working conditions.
You can use sites like Salary.com to research how much income you should be making or check out Glassdoor.com for reviews on working conditions before applying for jobs.
If you already have a job, consider asking for a raise to increase your income. Negotiating a higher salary is a great way to pay off debt and free up money for other goals.
Think about adding a side hustle to bring in extra income each month:
- Blogging
- Freelance writing
- Bookkeeping
- Babysitting
- Dog walking with Rover
- Tutoring kids online
You could also join a freelance work platform like Fiverr or Flex Jobs.
Blogging can also be a lucrative side hustle that will make you a passive income. Courses like Stupid Simple SEO and Making Sense of Affiliate Marketing can teach you about getting traffic to your blog and earning extra cash through affiliate marketing.
Courses like Proofread Anywhere and Bookkeeper Launch show you how to start side hustles in proofreading and bookkeeping.
6. Investing Options For Long-Term Wealth
Investing is a great way to grow money over time. There are several types of investments you could make:
Start Saving For Retirement Now
Saving for retirement is one of the most important things you can do to help you have financial freedom all your life.
You’ll have a much easier time achieving financial freedom if you open retirement accounts such as an IRA or 401(k) account, and put money into it every month.
If your employer offers a matching 401(k) account, take advantage of it so you can grow your money faster.
Open High-Yield Savings Accounts
Invest your money in High-Yield Savings Accounts (HYSA).
This is a savings account that generally has a higher interest rate than traditional savings accounts so you earn more on your money and increase your wealth quicker.
Invest in Real Estate
Property value and rental prices generally increase over time, so making investments in buying a house or apartment building can provide you with extra income each month.
You can use sites like Fundrise or Roofstock to start investing in property.
Many individuals pursuing financial freedom also get into house hacking where they rent out half of their house and live in the other. Essentially allowing them to live mortgage and rent-free.
Save for Your Kid’s Education
College Investing Plans like 529 savings plans or education savings plans are a great way to save for your child’s education. They operate similarly to retirement accounts, so if you have kids who are younger than 18 years old, this is an option worth considering.
7. Make Changes As You Go
Plans may have to change as you develop and situations change, so you have to be willing to make changes to your financial goals.
Be patient and stay focused on achieving your goals, and you’ll eventually get there.
Start small and set monthly or weekly goals that help you get closer to your end goal of becoming financially free.
Make lifestyle changes gradually rather than all at once since life can throw wrenches in your plans.
You may have to work overtime or get an extra job for a while to increase your income if your financial situation requires it.
Tips For Achieving Financial Freedom
1. Finances Between Couples
Managing your finances is one of the most difficult things you’ll ever do.
You’re busy- problems arise and there are kids to deal with and jobs to juggle- and so many problems that can wreck your budget and throw you off track!
It’s a good idea to work together and not apart on financial matters that affect both of your lives, like how much cash is needed to pay bills, what assets you want to purchase, saving for retirement, or going back to school.
It’s never too late to get your financial life and stop living paycheck to paycheck. The sooner you start, the better off you’ll be down the road!
2. Financial Advisor
A financial advisor, such as the ones at Mint and Empower (formerly Personal Capital), can give you advice on how to achieve your goals in your journey to financial freedom.
You’ll benefit if you pick a trustworthy financial advisor, knows their stuff, and has experience working with people in similar situations as yourself.
The financial advisors at Empower make the process as easy as possible for you to achieve financial freedom.
They provide a wealth of information about money management, investment tax, the stock market, or your retirement portfolio to help you make the best decisions.
3. Robo-Investing
Investing in Robo-Advisors is a good way to invest in the stock market.
It doesn’t require much time to set up, but it doesn’t offer the same sort of personalized service that you’d get from a traditional investment company or financial advisor.
Plus, some even offer free stocks to sign up with them!
M1 Finance, Betterment, and Webull allow you to build and manage a diversified portfolio without managing each individual security yourself.
4. Self Education
The best way to take control of your financial future is to learn as much as possible about money management, investing, taxes, credit scores, and other areas that will affect the management of your wealth.
You can find useful information by joining financial forums or blogs that discuss solutions for common issues people face regarding proper money management.
Read finance books and talk with others about their experiences dealing with financial freedom. Listen to personal finance podcasts for more advice!
Check with your local churches, community centers, and libraries. They sometimes offer classes on gaining financial freedom.
5. Declutter Your Home
There are many benefits to having less clutter in your life.
Not only does it cut back on storage or repair costs, but it also helps increase your mood and decrease your stress.
Sites like Decluttr make it easy to sell your unused possessions and can bring in some extra income that you can put toward your debt or into savings.
You can also start flipping your stuff online by using e-Bay, Facebook Marketplace, or Craigslist.
Not sure how to do this? The course Flea Market Flipping can help you sell your unwanted stuff- and even create a side hustle flipping flea market finds.
6. Take Care Of Yourself
Money is not the only part of financial freedom- taking care of yourself is a big part of living well!
Your physical, mental and emotional health are all important in achieving financial freedom.
This means making time for things like exercise, eating healthy food regularly, getting enough sleep each night, and doing something you enjoy every day.
You’ll be able to make better decisions about your money if you’re feeling at top-form mentally and physically.
Our Savvy Takeaways
Financial freedom means you have options for your future and have financial independence.
There are so many possibilities! You can create the kind of life you want to live and decide to retire at an early age and free up time to spend with your family.
Working together with your spouse or partner, finding a trustworthy advisor, learning as much as possible about money management, taking care of yourself physically and emotionally, and decluttering your life are all great ways to start making steps toward financial freedom.
So don’t wait, work toward your financial freedom today!
