1. Set goals
The first step to achieving financial freedom is setting your goals. Do you want to get rid of your debt for good so you can start saving for a house? Is there a place you’ve always wanted to travel to? Write down how much your bank account should contain, what you’ll use the funds for, and your target time frame for achieving this. The more specific the goals are, the higher the possibility of achieving them.
2. Budget it
Budgeting is an essential step to taking control of your finances. You can start by gathering all your financial statements and calculating them against your expected income. Then, create a list of your monthly expenses and adjust them to fit the range you set in each category.
Make sure to adhere to your spending plan so that all your bills are paid on time. This reinforces your goals and encourages you to build your wealth further, as it prompts you to avoid unnecessary expenses.
3. Live within your means
Being frugal does not imply extreme hoarding. It means wise spending, splurging only for the necessary things. For instance, instead of frequently dining out, consider cooking at home on weekends. This will boost your savings while upping your cooking skills.
Mastering a frugal lifestyle is not as hard as it seems. In fact, some wealthy individuals continue to live within their means and even below it. Making small adjustments by being aware of the things you really need and those that you simply want is a financially healthy habit to put into practice.
4. Track your spending
Tracking your expenses allows you to prioritize your spending, which helps eliminate wasteful buying habits. When you keep tabs on how much you’re taking out of your bank account, you become more mindful of your spending, enabling you to manage your funds better.
Various handy apps are available for tracking expenses. They provide an update on how much money you’re spending, which categories you’ve overspent in, how much funds are left in your accounts, and how much remaining debt you have. Of course, you can also take the traditional pen-and-paper route if you’re more comfortable with that.
Maximizing these tools can help you monitor your progress while keeping you on course in your journey towards financial freedom.
5. Pay off debts
Settling your debts will lift a massive weight off your shoulders. After paying off your dues, you’ll see the amount of money you have in the bank rise. It’s an incredible feeling watching the numbers climb, even if you had to watch it fall at the start, and it keeps you inspired to continue growing it.
The general principle is to pay down your larger dues first. Don’t be afraid to use a portion of your savings to settle your high-interest rate debts. Using cash reserves for debt repayment is a smart decision because those large balances will stop accruing interest.
Try talking to your creditors to negotiate a lower interest rate. You’ll be surprised at how they’re willing to meet you halfway. If you have a good account standing, you might be in a better position to qualify for reduced interest, allowing you to save some money as you pay down your debt.
6. Start investing
Saving for a rainy day is imperative. Experts advise setting aside three to six months’ worth of your savings. Start with an amount you can afford, like 2,000 each month. As you earn more, increase it to 3,000, then 4,000, and so on.
You’d also want to save for a contingency fund. This is to be used only for emergencies like an unscheduled visit to the hospital. If you’ve overspent on a particular category, don’t use this resource; instead, consider taking up more opportunities so you can earn the needed income.
You can also talk to your company about retirement plan options or see if there are already deductions being made for it. The charges get taken out before they hit your account, so you won’t feel like you’re losing money. Make it a habit to check it out periodically so you can monitor how your savings grow.
7. Get insured
If you have an insurance plan, you are financially protected in case of unexpected events. For instance, a health insurance plan can cover your medical expenses during hospitalization. Meanwhile, life insurance can provide compensation during life and death emergencies.
With an insurance plan in place, you have a cushion to fall back on in times of crisis. Getting insured then becomes an essential step towards fully achieving financial freedom, as it provides a dependable cash flow that helps you deal with emergencies with certainty.
8. Arrange for an auto savings plan
If you avail of an automatic savings plan, you arrange for a fixed portion of your salary to be automatically deposited into a separate bank account regularly. This allows you to steadily build up your savings without having to deposit funds manually every few weeks.
Talk to your employer about the options in your company for this type of arrangement. It’s a good thing to have some available funds you can tap whenever you need some. Aside from boosting your savings, it can also help you with budgeting and managing your spending, as you can’t use the money that has already been transferred into a separate bank account.
9. Monitor your credit score
A credit score reflects someone’s credibility when it comes to paying their debts. It determines the interest rate they can be offered when, for instance, financing a house, buying a car, or availing of insurance. Those with poor ratings usually find it harder to secure a loan, as they have a history of not settling their bills on time.
On the contrary, a high credit rating indicates a strong possibility of paying back the loan without any issues. This is why it’s crucial to regularly request a report to make sure there are no errors and marks that can ruin your name.
10. Educate yourself
Financial policies and regulations evolve, so it helps to review relevant tax laws at least once a year so that you can maximize all possible deductions. Also, make it a habit to check on the latest developments in the banking industry—especially if you have multiple deposit accounts—and do not hesitate to adjust your investment plan accordingly.
If you have a credit card, make sure you know your credit limit to avoid overspending. Most importantly, keep in mind that knowledge is the best defence against those who use scams to prey on people.
11. Strive to stay healthy
Taking care of your body will not solve your cash problems, but it will help facilitate productivity, which is crucial in building your financial safety net. When you invest in your health, you lower your risk of developing sickness, which means fewer visits to the doctor and, therefore, fewer expenses.
If you have good health, you can radiate positivity and happiness to better deal with people and live longer. These are vital elements you need in achieving financial freedom.
Take Full Control of Your Finances
Taking control of your finances is not as difficult as it sounds. With thoughtful planning and determination, you can start building the savings that will protect you against unexpected expenses. The practical steps mentioned above can guide you as you walk your way towards financial freedom.
1. Set goals