Breaking down the tasks into smaller steps is the best way to achieve financial freedom. Today we will discuss 5 simple steps to financial freedom. The saying “money can’t buy happiness” is something you may have heard before and, like most things that are commonly said, it’s probably true! I think what’s closer to the truth is that having money isn’t everything. Not having it is stressful and frustrating.
And while I don’t always take financial advice from rappers, Kanye has got a pretty good point. When you don’t have money, it consumes your life and becomes the lens through which you see the world. Hey, how much did that cost? Oh, that must have been expensive. Hey, I think you owe me 20 bucks. You can, you can pay me later. That’s Venmo. The less money you have, the more problems revolve around money. But being rich doesn’t fix every problem in your life. When you first start making more, you might still make decisions based on money. You may not be able to afford a lot of organic groceries, so you’ll take Uber Black to the airport instead of UberX.
Over time you can accumulate wealth and spend it on things that really matter, like organic strawberries and vacations. It can take a while to get there, but that’s OK because you’ve got time. So let’s get started here are 5 simple steps to financial freedom.
Step 1: Set Life Goals
What does financial freedom mean to you? What does monetary independence mean to you? Although it’s a desire shared by all, it’s an overly broad and vague objective. Regarding amounts and due dates, you must be precise. Your chances of success increase as your goals become more detailed.
These three goals should be noted:
1- What is needed for your lifestyle
2- How much cash do you need to have in your account to make that happen
3- When must you start saving that much money?
Establish financial mileposts at regular intervals between the two dates as you work your way backward from your deadline age to your present age. Put the goal sheet at the top of your financial binder and be sure to write down all amounts and deadlines precisely.
Step 2: Create an emergency fund
Save $1,000, and put it in a savings account in your name where you can access it easily. Use this money only for what it’s meant for emergencies. Don’t use it for beer or vacations or your dream engagement ring. Try a minimalist ring. This money should be used only to fix emergencies when your life would otherwise become derailed.
The great thing about the emergency fund is that it starts to give you that feeling of financial freedom and control over your life. For the first time in a while, you have some room to breathe.
Step 3: Pay off your debt
Approximately 80% of American adults are in debt. Maybe we’ve charged on a credit card when we didn’t have the money to pay it back in full or bought something we didn’t actually need for our house or had a luxury car that we could have gotten used to. I don’t want to say you shouldn’t buy nice things, but you should think very hard about what you can really afford if you want to avoid crippling debt in the long run.
Step 4: Create a financial runway
Have six to 12 months’ worth of expenses in your bank account at all times ideally in a safe, liquid investment. This way, should you ever get injured, lose your job, or otherwise find yourself unable to work for an extended period of time, you’ll be able to take care of yourself without having to worry about money.
To create this runway, open up a spreadsheet and take an honest look at your monthly expenses rent, groceries, Internet bills, and so on.
Related: How to STOP Wasting Money | Money Saving Tips
Step 5: Start a retirement fund
Retirement funds are one of those things that you know, you should do but haven’t done yet. When it comes to personal finance, it’s frequently about making short-term sacrifices for long-term gain. By setting aside a small amount each year, you can prepare yourself for a respectable retirement. Once you’ve got a solid emergency fund, pay off your debt, padding your bank account with the runway and you’ve got your retirement funds started you’re on your way to financial freedom and it won’t take finishing your retirement fund to finally realize that having money is not everything.