When you are financially free, you can make life decisions without being concerned about their financial consequences. Because you’re financially prepared for whatever life throws at you—you don’t have debt, you have money in the bank, and you invest for the future—you’re financially prepared for whatever life throws at you.
You have options when you have financial freedom—we prefer to say financial peace—rather than being controlled by your finances. When you have financial freedom, you aren’t worried about the financial burden of replacing a hot water heater or buying groceries for a single mom who just lost her job.
Financial Freedom: How to Achieve It
The path to financial freedom isn’t a get-rich-quick strategy. Financial freedom does not mean that you’re “free” from having to manage your money well. The opposite is true. Gaining complete control over your finances requires hard work, sacrifices, and time. But it’s well worth it!
Here are the ways you can start achieving financial freedom today:
Learn How to Budget
Get rid of debt once and for all
Set Financial Goals
Be Smart About Your Career Choice
Save Money for Emergencies
Plan for Big Purchases
Invest for Your Retirement Future
Look for Ways to Save Money
Live Below Your Means
Start an Online Business/side hustle
Help Your Kids Save for College
Pay Off Your Mortgage Early
Make Your Health a Priority
Get the Right Insurance in Place
Work With a Financial Advisor
Be Generous With Others
Are you ready to build a life of financial independence for yourself and your family? Let’s get started!
Learn How to Budget
You won’t become financially independent if you don’t have a plan for your money. That’s a recipe for financial disaster, not financial independence.
Unless you’re living on a budget, you’re not going to achieve financial freedom. You have to tell your money where to go, or you’ll end up wondering where it went. Give each dollar a job before the month begins, and track your spending. You can always adjust the amount in certain categories if you consistently overspend or underspend.
The importance of budgeting doesn’t end when you achieve financial freedom. After all, you’ll still need a budget no matter how much money you have.
It’s not by accident that you win the big championship game, and you’re not going to achieve financial freedom by accident either. Taking control of your money and budgeting with confidence is the first step to creating wealth on purpose. Download EveryDollar today—it’s the best budgeting app on the planet!
Getting rid of debt for good
Debt like credit cards, student loans, and car loans should be paid off as soon as possible. Why? Because you’ll never truly achieve financial freedom if you’re constantly paying banks and lenders hundreds of dollars every month.
Income is your most powerful wealth-building tool, and if all you have to work with is what’s left over after paying your credit card bills and student loans, you’ll never reach your money goals.
In order to build wealth that will last, you must first pay off your debt. Make sure you have $1,000 saved and put aside for emergencies before you start tackling your debt.
When people start budgeting, they feel like they’re getting a raise, so that’s great for you. Spend all that extra cash on your smallest debt until it’s gone. Then keep it going. You have to work hard to pay off debt, but nothing beats the feeling of actually keeping your money.
Sign up for Financial Peace University, the course that has helped millions of people just like you get out of debt (and stay out of it)!
Set Financial Goals
Financial freedom is a great dream for everyone. But a dream without a goal is just a wish. To get to financial freedom, you must set financial goals like getting out of debt or saving for retirement. They give you something to aim for!
How do you know if you have a good goal to aim for? Here are some tips:
-Be specific.
-Make your goals measurable
-Give yourself a deadline
-Make sure they’re your own goals
-Put your goals in writing
It’s great to want to be debt-free, but that’s not enough. How much debt do you need to pay off? Does it amount to $20,000? Perfect! When do you want to be debt-free? 12 months sounds great, Awesome you just set your goal.
Now you have a specific, measurable goal that is personal to you with a hard deadline attached to it: I want to pay off $20,000 worth of debt in 12 months. All you have to do is keep it front and center while you pursue it.
Be Smart About Your Career Choice
In order to build wealth, your income is your biggest tool. Therefore, choosing a career is a big deal. Do not stay stuck in a dead-end job, especially if it is causing you misery. Make sure you choose a job that you enjoy and that will support your financial security goals so you can enjoy yourself.
How should you know what to look for? Here are a few tips:
Start with the end in mind. Does this job make sense in relation to your overall goals?
Consider whether there’s potential for increasing your income as your value increases, even if you’re not earning your dream salary right away.
Can you grow professionally and personally? Are there opportunities for you to move up?
Find a job you love that allows you to use your talents and gifts. Don’t spend your career in something you hate.
Do the benefits support your goals of financial freedom? Your options for retirement savings and health insurance can dramatically affect your ability to build wealth.
The career you choose can have a big impact on your long-term financial plan, so it’s important to take it seriously.
Save Money for Emergencies
It acts as a buffer between you and the unexpected life events that happen to all of us, such as car repairs, broken appliances, and medical deductibles, so if you want financial freedom, you need an emergency fund fully funded. If you’re out of debt, increase your emergency fund to cover 3–6 months of expenses.
When an unexpected life event occurs, having the cash on hand gives you peace of mind and plays a crucial role in your overall financial plan. You’ll be able to say yes to shopping splurges and specialty lattes with no guilt once you have a fully funded savings account.
Plan for Big Purchases
In addition to not taking on debt, you’ll need a savings plan for purchases that aren’t emergencies. Take summer vacation, for instance. You can save money by creating a line item in your monthly budget and dividing your vacation cost by the number of months you have left until you return home. If you don’t live in debt anymore, you can enjoy your vacation without worrying about a credit card bill following you home.
By having a full emergency fund and a plan for covering big purchases, you will have the financial foundation to begin investing.
Invest for Your Retirement Future
With a short-term savings plan in place, you’re ready to work with a financial advisor to maximize your long-term investment potential. If you start investing as soon as possible, your money will have more time to grow. That’s the power of compound growth. Here’s how you can get started:
Take advantage of your employer’s tax-favored retirement accounts, such as your 401(k) or 403(b), to get started. According to The National Study of Millionaires, 8 out of 10 millionaires invested in their company’s 401(k) plan, which contributed to their financial success.
Consider investing 15% of your income towards retirement. If your employer matches 401(k) contributions, take it! Don’t pass up free money.
You can invest your full 15% in a Roth 401(k) at work if it has good mutual fund options. In contrast, if you have a traditional 401(k), invest up to the match, then invest the remaining 15% in a Roth IRA. You can go back to your 401(k) if you still have 15% left after maxing out your Roth IRA.
Why is a Roth a good idea? When you invest in a Roth 401(k) or Roth IRA, the money you invest grows tax-free. That means you don’t have to pay taxes on it when you withdraw money in retirement. That’s a big benefit you don’t want to miss out on.
Look for Ways to Save Money
Taking a good look at exactly what you’re spending your money on every month is a smart idea if you haven’t already!
In everyday life, it’s easy to forget about that gym membership you signed up for but haven’t used. Or Netflix, Even though you only watch a couple of hours of television each week, you still subscribe to all those streaming services.
Here are a few ways you can save some money right now:
Buy generic over name brand.
Meal plan and take leftovers to work.
Brew your own coffee at home.
Pause or cut subscriptions and memberships.
Reduce energy costs.
Use cashback apps and coupons. (upside – pays you back cash)
In fact, 93% of millionaires still use coupons to save money on their purchases even after reaching financial freedom.1 That’s because saving money is a hard habit to break!
Live Below Your Means
To reach financial freedom, you have to have self-discipline and be willing to say no to some things you will never be able to afford in the short term so you can save more in the long run.
I’m not saying that having things or wanting nice things is bad, but we don’t want your stuff to have you. When you buy that car or that house with money you don’t have to impress people you don’t even like, you’ll constantly find yourself trapped in the vicious cycle of debt and overspending. That’s not a recipe for financial freedom. In fact, it’s the opposite.
Help Your Kids Save for College
In addition to contributing 15% of your income to retirement, you can start saving for your kids’ college fund by investing in an Education Savings Account (ESA).
The money you contribute to an ESA grows tax-free, which means that you will not have to pay taxes on it when it’s used to cover college expenses, just like a Roth IRA. With an ESA, you can currently contribute up to $2,000 per child per year. Your investment pro can help you find out if income limits apply to you.
If you want to save beyond an ESA (or you don’t qualify to contribute to one), talk to your financial advisor about a 529 plan. There are some 529 plans that you should avoid, like prepaid tuition plans and fixed investment plans.
You can set your kids up for financial freedom by helping them avoid student debt by saving for their college education!
Pay Off Your Mortgage Early
There’s a reason the average millionaire pays off their house in about 10 years.4 Imagine your life without a mortgage payment. The grass under your feet just feels different when you own it (not owe it to your bank or mortgage lender). That’s financial freedom.
If you make an extra house payment every quarter, you can pay off your mortgage years ahead of schedule and save tens of thousands of dollars in interest.
Make Your Health a Priority
Healthy eating and regular exercise are good for your health, but what if I told you that a healthy lifestyle is also good for your wallet?
We have a health crisis in America today, and if you don’t fix it, you might lose your financial freedom. A high insurance premium is the result of more health problems, which means more doctor visits and medical bills.
Treatment of diseases caused by poor diet costs about $300 per person or $50 billion nationally.6 And about one out of ten Americans owe some kind of medical debt — that’s 23 million Americans with debts totaling close to $200 billion.
Taking care of your physical, mental and spiritual health also includes taking care of your financial health. Another study found that reducing the risk of heart disease, cancer, diabetes, and Alzheimer’s disease by following a healthy diet could save the U.S. government $88.2 billion.
Get the Right Insurance in Place
What’s the connection between insurance and financial freedom? In fact, a lot! When you look at teams that win championships, they don’t just focus on offense—they also have a strong defense. That’s what insurance is: It’s the defense you use to protect your finances.
If you don’t have the right insurance, one bad accident or one lawsuit could devastate everything you’ve worked for. Budgeting, saving and investing help you reach financial freedom, but insurance keeps you there.
Here are eight types of insurance you simply shouldn’t go without:
Term life insurance
Auto insurance
Homeowners/renters insurance
Health insurance
Long-term disability insurance
Long-term care insurance
Identity theft protection
Umbrella policy
Work With a Financial Advisor
When it comes to money and investing, the concept of actively making decisions may feel overwhelming. If it does, you’re not alone.
You’ve worked hard to lay the right foundation, so you shouldn’t let your financial future be determined by chance. Work with a financial advisor to help you navigate the market and navigate your investment options.
A financial advisor can help you:
-Make decisions about your investment strategy
-Rebalance your funds regularly so you minimize your risk
-Plan your financial independence realistically
-Investing beyond retirement accounts is an option you should be aware of
-Prepare a withdrawal plan based on your specific situation
Be Generous With Others
Having financial freedom is more than just being able to cope with unexpected expenses like car repairs. When you realize you can help others, the fun really begins! Imagine helping a struggling family fix their car! It’s not about you anymore—it’s about leaving a legacy!
And the best part is you don’t have to wait until you reach financial freedom to be generous. Whether you’re paying off debt or establishing an emergency fund, we always recommend starting your budget with a line item for giving. You might give to local churches or charities at that point, but once you’re financially free, you can really be generous!
If you live like no one else, later you can live and give like no one else. It’s worth all the hard work it takes to get there. You’ve got this!
