Financial Freedom: 10 Helpful Ways to Achieve It - Life's Little Pleasures and Struggles

0 Shares

Who amongst us doesn’t want financial freedom? We all do, but are we all taking the proper steps towards it?

Attaining financial freedom is a goal for many people, but unfortunately, not that many people manage to achieve it. The reality is, for most people, financial freedom doesn’t just come automatically. One needs to do careful planning and put efforts into improving their finances.

We spend a lot of time planning for many things, such as our education, careers, marriages, and having kids, but sadly, many of us fail to make a practical plan to achieve our important financial goals, such as financial freedom.

This post contains affiliate links, meaning that if you make a purchase from these links, then I may earn a small commission at no extra cost to you. This is one of the ways I make money as a blogger, so thank you for your support.

What does financial freedom mean to you?

The very first step toward achieving financial freedom is to define what exactly it means for you. The definition of financial freedom can be personal. Meaning you can add or subtract to/from what it generally means. But you have to know what you really intend to achieve with financial freedom.

Financial freedom generally means you are earning enough to save, doing the things you love and enjoy, and still having extra at the end of the month. That means having enough savings for your rainy days as well as for the golden years, enough investments and cash on hand to afford the kind of lifestyle you want, and a growing nest egg that will allow you to retire early or comfortably.

To me, financial freedom means:

Having no debt (maybe except for mortgage)
Having at least 6 months’ worth of living expenses saved in an emergency fund
Being able to save at least 15% of our income in a retirement account
The ability to pay for kids’ college education
Living comfortably within our means (not living paycheck to paycheck)
Enjoying 2 nice vacations every year – each at least one week long (doesn’t have to be luxurious)
Being able to help others in need without much thought

Once you have defined what financial freedom means to you, you can start taking steps toward achieving your goals. When you will have financial freedom, you will have options. You won’t have to choose between replacing your old appliance and sending some money for a family member who just lost his job in the pandemic.

Below are 10 steps you can take toward achieving financial freedom for yourself and your family:

1. Learn how to manage your finances

There was a time when I used to think that financial freedom only referred to earning a lot of money. While having a good, solid income is helpful for your financial well-being, you don’t automatically become financially free once you start earning a 6-figure income. You must know how to make your money work for you.

By learning to manage your money well, you can achieve financial independence even with a decent income. There are plenty of examples around us to support that.

So, if you want to become financially stable or attain financial freedom, you will have to seek knowledge and advice from the financial gurus. Don’t ever stop educating yourself, especially when it comes to personal finance. Understanding your finances is important, and responsible money management needs you to educate yourself about how to budget, save, and build wealth.

Many people simply don’t have the financial education that is needed to make sound financial decisions. These people don’t think that learning about money management or personal finance is just as important as any other subjects. So, they end up making many big mistakes while handling their money, and jeopardize their financial health. Improving your financial habits is something you may want to tweak from time to time. There may be new thoughts and ideas on personal finance, and new opportunities to make more money.

Add to your reading list: The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness by Dave Ramsey

2. Make a sustainable budget

It’s important to not only create a sustainable, realistic budget, but firmly stick to it. This goes a step farther than just tracking your expenses. Instead, you will have to think critically about how you are spending your money, and look for ways to cut corners on your outgoing cash.

A budget helps you hold yourself accountable. Without a budget, even if you have a very good monthly income, instead of saving money, you will most likely overspend and end up being in debt. Because saving money has very little to do with the amount of money you earn. How you manage what goes through your fingers usually makes the difference. It needs you to develop some healthy financial habits. Creating a budget is one of them. Without a budget, you really can’t make your dollars stretch because you might not even know how much money you have to work with!

When you have a realistic budget, it’s easier to track your spending, cut unnecessary expenses, and live within your means. On a budget, you only buy things/services you can afford, and won’t add more to your debt.

3. Live well below your means

Without living below your means and without making the most of what you have, you can’t really achieve financial freedom. It doesn’t matter how much money you make if you are busy spending it all instead of saving some. So, be content with what you have, and focus on what is truly important and meaningful in your life.

Don’t compete with others. You don’t need everything that they have. Remember, “peer pressure” is one of the toughest and costliest pressure one can feel. How easily people surrender to this nowadays! Just to compete with other people in one’s neighborhood, community, friend-circle or office, people spend more and more money to buy unnecessary luxuries, often beyond their means. They buy stuff they don’t need with credit cards, indulge in debts, pay high interests, work harder and longer hours, waste more, and tend to show off all the time only to impress other people who really don’t matter much!

Believe me, people who you think “have it all” aren’t really the happiest or most successful people in the world. Many of them are highly stressed out, broke and struggling financially!

Rather, get rid of the things that neither serve any true purpose nor add value to your life. Be grateful in your current circumstances, but continually strive to make them better.

4. Don’t live with your debt for long

Becoming debt-free is a must if you want to save money, build wealth, and achieve financial freedom. It will give you relief from the worry and stress that come with debt. It will also bring you freedom and options, which is why you have to make a decision to kick debt to the curb once and for all.

Consider paying off your credit card debt, medical bills, any personal loans, and even student loans. If you want total freedom, consider paying off your mortgage as early as possible, and live on your own terms, not on bank’s!

When you are debt-free, you have full control over your income, and that’s an incredible feeling. It will leave you with more money for savings and investing, even for spending.

Even if you don’t have the extra money to reduce the debt balances faster, you can significantly cut your interest expenses. Consider options such as refinancing, doing a balance transfer at 0% interest, consolidating your debts, or changing payment plans on student loans to make debt more manageable.

5. Start investing now

Your financial freedom largely depends on the timing of your investment. That is to say, the sooner you start investing, the better your chance is to be financially stable. Now that you have paid off your debt, it’s time for you to start investing in your future.

Delaying or putting it off could actually cost you more than you realize. Experts estimate that 40% of people have experienced a significant financial loss due to procrastination. By waiting longer to invest, you could be missing out on some potentially sweet financial gains which you are sure to regret later on!

In fact, when you start investing is more important than how much you invest. It can make a huge difference on the final amount you end up with than the amount of money you actually invest over time. Also, you can’t underestimate the power of compound interest! Therefore, the sooner you put your dollars to work, the more you are likely to benefit in the long term.

6. Create an emergency fund

You maybe tired of reading about emergency fund everywhere, but you can’t really do well financially without having one in place! If you want to improve your finances, achieve financial freedom, and set yourself up for success, you need an emergency fund big enough to pay at least 3 months of expenses; preferably 6 months. The more the better.

This is the real world, and it is full of things like job loss, sudden medical expenses, and family emergencies. Life happens, and in most cases, there is nothing you can do to prevent them. But you should prepare well to tackle them financially.

Start small. In the early days of saving, it’s all about consistency, not amount. Start putting something away now by trimming or cutting expenses like advanced meal planning, opting for generic brands, and cutting any monthly expenses you can live without, and build your fund over time. Whenever you receive a salary raise, tax refund, or bonus cash of any kind, use it to build up your emergency savings. You may also consider selling any unused items around the house to build up that cash as quickly as you can.

Once you have an emergency fund in place, take a look at it at least once each year, and determine if it is sufficient to cover at least 3 to 6 months of living expenses, based on your current necessities. If it isn’t, set up a plan to refresh it as needed. It’s hard to remain financially stable without a well-stocked emergency fund.

Related post: An Emergency Fund and Your Peace of Mind

7. Invest in your retirement account

Consider contributing into your retirement savings fund, such as a Roth IRA or 401(k).

Investing in your retirement now, no matter how much or how little you can manage to contribute, will make your golden years less stressful and more enjoyable. Half of Americans won’t be able to maintain their standard of living in retirement. So, put your future needs before your present wants. Save your money today so you can spend it in your golden years. Your future-self will thank you.

If you have debt, you should contribute up to the amount that your employer will match until you are out of debt (not counting your mortgage). Once you are debt-free, then you should begin contributing 10-15 percent of your income. The amount you get from your employer’s match should count towards that fifteen percent.

If you do not qualify for a 401(k), you should consider contributing to a Roth IRA or a traditional IRA instead.

8. Make savings automatic

Automating your savings is one of the easiest and important steps you can take to ensure that you are on the right track to financial freedom. If you have your financial priorities defined, such as saving for retirement, building emergency fund, saving for your kids’ college education, or buying a home, making your savings automatic can make that happen. If you plan to save “whatever is left over” after you spend the rest of your paycheck, you will never put anything away.

Whether you are building up emergency savings or putting money away for retirement, that money should come out first, ahead of the rest of your spending. So, pay yourself first, and set up an automatic transfer on paydays from your checking account to the savings account of your choice, and forget about it.

Add to your reading list: Financial Freedom: A Proven Path to All the Money You Will Ever Need by Grant Sabatier

9. Maintain your credit score

Your credit score is very important. It determines what interest rate you are offered when purchasing a new car or refinancing a home. A good or excellent credit score will save you thousands of dollars over the years. It also impacts seemingly unrelated things, such as your auto insurance and life insurance premiums, sometimes even your job.

The reasoning is that if someone isn’t responsible or good with money, he is likely to be irresponsible in other aspects of life, such as driving recklessly or drinking while driving. Because various studies have shown that credit rating tends to be a good indicator of how many claims a driver will file. That allows insurers to match more expensive rates with drivers who will likely file for more or frequent insurance claims. (Source)

This is why it’s important to check your credit report at least 2 times a year to make sure that there are no erroneous black marks ruining your good name.

10. Take good care of your health

Yes, you can save tons of money by taking good care of your health. Major medical problems drain your bank accounts, increase your health insurance rates, and generally guarantee that you will have long-term financial problems.

Also, if someone has to go through a major medical procedure, there is a good chance that their insurance will not cover everything. In that case, they could easily accumulate tens of thousands of dollars of debt. If you are not taking good care of your health, you are jeopardizing your financial health as well.

Invest in good health with regular visits to your doctors and dentists, and follow health advice about any problems you encounter. Many health related issues, can be helped, controlled, or even prevented with lifestyle changes such as regular exercise, a healthier diet, and proper rest.

Final words

When you decide that you want to attain financial freedom for yourself and your family, and start working toward it, it’s important to understand that you will not become financially free overnight. You need to work hard for years, sometimes even decades to reach your goal, and for that you need to be patient.

During that time, you may become frustrated or discouraged, and decide to give up on your dream. Therefore, it’s important to remember the reason why you want to achieve financial freedom, and then focus on the end goal. Keeping the bigger picture in mind will help you deal with the occasional disappointments and navigate the day-to-day decisions to support your goal.

Disclaimer: I’m not a financial expert, and this blog post only provides personal finance information for educational purposes, and it is not intended to provide legal or professional advice.