Financial Freedom Roadmap: 12 Steps to Wealth and Abundance
“Real wealth is not about money. Real wealth is: not having to go to meetings, not having to spend time with jerks, not being locked into status games, not feeling like you have to say ‘yes,’ not worrying about others claiming your time and energy. Real wealth is about freedom.”
In the midst of uncertainty, financial freedom brings peace of mind that is priceless. When you are financially stable when a recession or worse, a pandemic hits, you’ll have the luxury of focusing on inconveniences rather than your family’s next meal.
Beyond the ability to be prepared for emergencies, financial freedom gives you the liberty to choose—what you do for a living, when to retire, where you live. This type of security feels like a dream for most. But the truth is, with discipline and commitment, most can attain financial freedom.
Financial freedom means taking ownership of your finances and future, controlling your finances instead of your finances controlling you.
Reaching your financial goals may be one of the most challenging endeavors of your life! Going through the steps to financial freedom isn’t easy, and it usually isn’t quick. It will take sacrifice, time, and commitment, but the peace financial stability brings is well worth it!
How to achieve financial freedom:
1. Understand where you are and where you want to go.
Notate and keep track of your budget, savings, debt (all of it, even what you owe family), investments, and credit score monthly at a minimum. Write down your financial goals. How much money will you need for retirement, to purchase your dream home, raise children, or whatever it is that you want to achieve? Now, create a plan to back into the amount that you will need! Yes, it’s probably a significant number. You can do it!
2. Track your spending and create a zero-based budget.
A written budget is the foundation of your financial freedom. A budget will let you know what you can and can’t afford and how to spend your money. Just because you can pay for it doesn’t mean you can afford it. You can afford “it” when you’ve accomplished all of your financial goals and still have discretionary funds left over.
For help tracking spending by category, try apps like Mint or Truebill. These apps compile your monthly expenses in one place so you can get a clear view of where your money is going. The app analyzes spending habits when linked to your bank account or credit card. The best part, if you see a subscription you no longer need, you can cancel directly via Truebill with the click of a button.
3. Pay yourself and your bills the day you get paid!
Set aside a daily budget for food and other necessary expected expenses. Remember: STICK TO THE BUDGET! If life happens, don’t let it derail you completely. Move on and get back on track— YOU’RE ON A MISSION HERE. Your freedom is at stake.
4. Use credit cards sparingly, if at all.
Using credit cards only allows you to get something now, while paying more for it later. Why pay more if you don’t really need it now?!Credit cards should only be used for emergency expenses like medical bills, car repairs, or home maintenance.
If you want to build your credit use a rewards credit card for purchases like gas and groceries. To avoid interest fees, only spend what is budgeted and can be paid off in 30 days or less.
5. Shift to a net-worth mindset.
The way you think about money is connected to how you behave. Your net-worth measures your financial worth by subtracting your liabilities (what you owe) from your assets (what you own). It doesn’t matter how much money you make or how much money you save if your net worth isn’t increasing.
It’s essential to think about money positively. Don’t let your debt discourage or distract you. Avoid the trap of acquiring a bit more debt just because you already have debt. This approach to spending will slowly, then quickly strangle your finances. Every bit counts.
6. Create an emergency fund.
It’s important to have cash on hand to be flexible in the case of an emergency. If you’re just getting started, create a $1000 unexpected savings fund, and add a $500 check-to-check buffer in primary checking (i.e. never let your checking account drop below $500). Seek small ways to save. Live minimally, cut back on cable, grow your own veggies, or if you receive a free meal put that unused expense immediately in savings.
A” 9-5″ by nature isn’t designed to build financial freedom. If you have limited discretionary funds, your only option is to reduce your expenses or increase your income. Strive for a promotion, find a higher paying offer, supplement with a part-time job, evaluate your talents, and the needs of your social sphere to create a service you can provide for a fee. Or sell everything you don’t need.
7. Eliminate credit card debt.
There’s several ways to approach paying off debt. You can start with your most costly debt (highest interest rate), or you can start with paying off your lowest balance debt, often referred to as the snowball method. Using the latter approach will ensure you accomplish a quick win, gain momentum, and stay motivated.
8. Fortify your savings with a secondary fund.
This fund covers all expenses for at least 6-12 months. We can’t say it enough, automate paying yourself first! Paying yourself first allows you to make yourself and your financial goals the priority. When you put money in your savings on payday, you can build your budget around your savings rather than your expenses. To ensure you do this, calculate the appropriate amount to save, and schedule a recurring transfer on payday.
Use sinking funds savings account for annual reoccurring expenses. Separate from your primary savings, create a fund for expenses that do not occur monthly but at least once a year. This will help you to spread costs over the year, rather than depleting your savings unexpectedly.
Identify your annual recurring costs in advance. These expenses include annual subscriptions, vehicle and home maintenance and insurance, property taxes, and holiday and birthday gifts. Then total the costs and divide by 12; this is the amount you need to add to your sinking funds account every month.
9. Set aside 15% of income for retirement.
You know you don’t want to work NOW, let alone post 65! So start investing NOW! Begin with a 401(k) investing the full employer match. Invest the remainder into a Roth IRA.
If you have more funds to invest, consider real estate or stocks. To successfully invest over a lifetime, you’ll need a methodical framework for making decisions and the ability to limit emotions from undermining your framework.
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10. If you have children, start a 529 college savings plan or Education Savings Accounts (ESAs).
The best gift you can give your kids is putting them on the path to independence and financial success early. This means avoiding student loans. After you pay off your debt (except your mortgage), fortify your savings and are on track for retirement, begin saving for your children’s college education.
11. Pay off your mortgage early.
If owning a home is right for you, use any additional funds to build a down payment or pay off your existing mortgage. To save on interest, choose a 15-year mortgage that is no more than 25-30% of your take-home income. Do you best to put down 20% of more to avoid mortgage insurance (one of the most backwards expenses-basically an additional cost to ensure you don’t default). Now, imagine owning a home with no monthly mortgage expense.
12. Build wealth, have fun, and GIVE.
Sharing your wealth with those in need can be especially rewarding.
CONCLUSION
Patience.
Don’t feel any less than if you’re in a different place on an uneven playing field. Just stay focused. Stay the course. Climb those steps to financial freedom! What’s suggested isn’t easy, but neither is living check-to-check. On both paths, you’ll struggle, but there’s only one in which you’ll surely win your freedom.
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