Reaching financial freedom is a goal for many people. To have sufficient savings, some investments, enough cash to live a good lifestyle and a nest egg for the future sounds like a dream come true. But is it all just a pipe dream? Is it possible to be financially secure and not have to worry about earning a certain amount of cash every year to stay afloat?
Can you choose a career based on passion alone without worrying about how much the pay is? The good news is that yes, it’s all possible.
It’s called financial freedom. Let’s uncover some of the habits that has helped to make this dream a reality for many people.
Be Financially Aware
Knowing how much money you have and how much you need to have to live well is essential. Get informed on how money works and how you can put it to work for you. If you’re a student, you may have the option to refinance your student loans in order to save money.
If you have a mortgage and you’re struggling to make the repayments, you may be able to re-mortgage your home or take out a personal loan.
Do you know what interest rates you’re currently paying on the debt you do have? Are you familiar with personal credit scores and how they work? These are all important things to know.
You need to know where your funds are going and where you can cut back with spending when you need to. The only way to do this is to record all your expenses and keep a track record for easy reference. Record everything from loan repayments and major purchases to impulse buys and grocery runs.
It’s best to use a budgeting app or set up a Google spreadsheet where you can input all data on the go.
Think About Retirement
You might be thinking you’re too young to think about retirement but it’s never too early to prepare for the future financially. Experts recommend saving 15% of your pre-tax income each year – assuming you start saving at 25 and plan to retire at 65.
If you’re in full time employment, ask your employer about the possibility of increasing your 401(k) and paying into an IRA contribution.
What does financial freedom mean to you? Lying on the beach 7 days a week with a cocktail in hand? Buying a big house with horses and stables in the countryside?
If so, it’s time to get more specific. Think about the numbers you want to achieve and write them down.
How much would you like to have in your bank account? Would you like to be debt-free or do you mind having loan repayments to make? Would you like to have a nest egg of investments to pass onto the next generation?
If so, what investments would you like to have? These are all important consideration to think about. Once you have a number or goal in mind, it’s a good idea to work backwards and set realistic milestones that will help you to hit the end targets that you’ve written down.