Financial Freedom — How to be Financially Free
You may have heard a lot of people say to you that money doesn’t buy happiness, and, the person that told you that probably has a lot of money themselves.
I, personally, don’t think they are wrong. To some extent. Having money is not everything, not having it, is.
The lack of money can often lead to stress, pain, frustration, and a lot of other negative feelings. These thoughts eventually begin to consume you and become the lens through which you begin to view life.
When we don’t have money, every problem seems to revolve around it. Whilst being rich won’t fix every problem in your life, having money seems like a worthwhile pursuit and a goal that is wanting to be achieved by many of us!
When you become financially free, you will no longer have to make every decision solely based on money. You won’t have to take a certain job, just because it pays better, or look at the price of organic groceries to make sure you can afford them.
Imagine… Imagine being in a place where you never have to worry about money ever again, or where money wasn’t a major cause of stress in your life and relationships.
The steps below aren’t as hard as you might think, but they do not happen overnight. You need a good mindset, a strong enough ‘reason why’, and persistence.
How To Achieve Financial Freedom
Step 1: Start by Creating An Emergency Fund
An emergency fund is a lifesaver, literally. Save a percentage of your monthly income and put it into an emergency fund that you will only use in the utmost dire of circumstances. This can be easily set up by creating a standing order with your bank. You’re in complete control of how much you are willing to transfer to your emergency fund bank account, and it transfers automatically, so you never see it taking effect.
I recommend you start with saving at 10% of your monthly income in this emergency fund.
Emergencies don’t mean, a night out with girls, or the fact that you ‘need’ a new pair of shoes for a holiday you’re going on next week. Your emergency fund should not be used to fund holidays, nights out, wedding anniversaries, and things alike! This money should only be used if and when you absolutely have no other choice. For example, your car might break down, or you need to replace the water heater. These are exceptional circumstances that will have a significant, negative effect on your life.
Why do you need an emergency fund? It’s simple. An emergency fund allows you to have some money on the side to help you during unexpected situations so that you don’t need to take out a loan, pull out your credit card and land further in debt or borrow money from friends/ family. This money allows you to have a kind of safety net… something you can fall back on.
The great thing about an emergency fund is that it starts to give you that feeling of financial freedom/ security. For the first time in your adult life, you have some room to breathe. This step is the quickest way to finally start to gain some control of your financial life.
Step 2: You need to take action on your Debts
You can take a look at this post, to help you pay off your debt and start building a financial future. There are some really good tips and tricks in here that will get you out of debt in no time.
Being in poverty and in debt is now more common than ever.
SIMPLE STEPS TO FINANCIAL FREEDOM
october 26, 2021
You may have heard a lot of people say to you that money doesn’t buy happiness, and, the person that told you that probably has a lot of money themselves.
I, personally, don’t think they are wrong. To some extent. Having money is not everything, not having it, is.
The lack of money can often lead to stress, pain, frustration, and a lot of other negative feelings. These thoughts eventually begin to consume you and become the lens through which you begin to view life.
When we don’t have money, every problem seems to revolve around it. Whilst being rich won’t fix every problem in your life, having money seems like a worthwhile pursuit and a goal that is wanting to be achieved by many of us!
When you become financially free, you will no longer have to make every decision solely based on money. You won’t have to take a certain job, just because it pays better, or look at the price of organic groceries to make sure you can afford them.
Imagine… Imagine being in a place where you never have to worry about money ever again, or where money wasn’t a major cause of stress in your life and relationships.
The steps below aren’t as hard as you might think, but they do not happen overnight. You need a good mindset, a strong enough ‘reason why’, and persistence.
How To Achieve Financial Freedom
Step 1: Start by Creating An Emergency Fund
An emergency fund is a lifesaver, literally. Save a percentage of your monthly income and put it into an emergency fund that you will only use in the utmost dire of circumstances. This can be easily set up by creating a standing order with your bank. You’re in complete control of how much you are willing to transfer to your emergency fund bank account, and it transfers automatically, so you never see it taking effect.
I recommend you start with saving at 10% of your monthly income in this emergency fund.
Emergencies don’t mean, a night out with girls, or the fact that you ‘need’ a new pair of shoes for a holiday you’re going on next week. Your emergency fund should not be used to fund holidays, nights out, wedding anniversaries, and things alike! This money should only be used if and when you absolutely have no other choice. For example, your car might break down, or you need to replace the water heater. These are exceptional circumstances that will have a significant, negative effect on your life.
Why do you need an emergency fund? It’s simple. An emergency fund allows you to have some money on the side to help you during unexpected situations so that you don’t need to take out a loan, pull out your credit card and land further in debt or borrow money from friends/ family. This money allows you to have a kind of safety net… something you can fall back on.
The great thing about an emergency fund is that it starts to give you that feeling of financial freedom/ security. For the first time in your adult life, you have some room to breathe. This step is the quickest way to finally start to gain some control of your financial life.
Step 2: You need to take action on your Debts
You can take a look at this post, to help you pay off your debt and start building a financial future. There are some really good tips and tricks in here that will get you out of debt in no time.
Being in poverty and in debt is now more common than ever.
Maybe, you have brought something you didn’t really need to furnish the new house that you couldn’t afford. Or, you might have purchased a new car, when you could have brought a used one. Maybe, you finally took that dream holiday that you’ve been longing to go on, on credit.
One of the biggest problems with debt is that, the deeper you go, the more restrictions you have on your monthly income. So, when you’re paying those few hundreds of pounds on your mortgage, bills, car payments, outstanding loans…etc, it severely restricts how much money you can save, and how much you can continue spending before you run out.
SIMPLE STEPS TO FINANCIAL FREEDOM
october 26, 2021
You may have heard a lot of people say to you that money doesn’t buy happiness, and, the person that told you that probably has a lot of money themselves.
I, personally, don’t think they are wrong. To some extent. Having money is not everything, not having it, is.
The lack of money can often lead to stress, pain, frustration, and a lot of other negative feelings. These thoughts eventually begin to consume you and become the lens through which you begin to view life.
When we don’t have money, every problem seems to revolve around it. Whilst being rich won’t fix every problem in your life, having money seems like a worthwhile pursuit and a goal that is wanting to be achieved by many of us!
When you become financially free, you will no longer have to make every decision solely based on money. You won’t have to take a certain job, just because it pays better, or look at the price of organic groceries to make sure you can afford them.
Imagine… Imagine being in a place where you never have to worry about money ever again, or where money wasn’t a major cause of stress in your life and relationships.
The steps below aren’t as hard as you might think, but they do not happen overnight. You need a good mindset, a strong enough ‘reason why’, and persistence.
How To Achieve Financial Freedom
Step 1: Start by Creating An Emergency Fund
An emergency fund is a lifesaver, literally. Save a percentage of your monthly income and put it into an emergency fund that you will only use in the utmost dire of circumstances. This can be easily set up by creating a standing order with your bank. You’re in complete control of how much you are willing to transfer to your emergency fund bank account, and it transfers automatically, so you never see it taking effect.
I recommend you start with saving at 10% of your monthly income in this emergency fund.
Emergencies don’t mean, a night out with girls, or the fact that you ‘need’ a new pair of shoes for a holiday you’re going on next week. Your emergency fund should not be used to fund holidays, nights out, wedding anniversaries, and things alike! This money should only be used if and when you absolutely have no other choice. For example, your car might break down, or you need to replace the water heater. These are exceptional circumstances that will have a significant, negative effect on your life.
Why do you need an emergency fund? It’s simple. An emergency fund allows you to have some money on the side to help you during unexpected situations so that you don’t need to take out a loan, pull out your credit card and land further in debt or borrow money from friends/ family. This money allows you to have a kind of safety net… something you can fall back on.
The great thing about an emergency fund is that it starts to give you that feeling of financial freedom/ security. For the first time in your adult life, you have some room to breathe. This step is the quickest way to finally start to gain some control of your financial life.
Step 2: You need to take action on your Debts
You can take a look at this post, to help you pay off your debt and start building a financial future. There are some really good tips and tricks in here that will get you out of debt in no time.
Being in poverty and in debt is now more common than ever.
Maybe, you have brought something you didn’t really need to furnish the new house that you couldn’t afford. Or, you might have purchased a new car, when you could have brought a used one. Maybe, you finally took that dream holiday that you’ve been longing to go on, on credit.
One of the biggest problems with debt is that, the deeper you go, the more restrictions you have on your monthly income. So, when you’re paying those few hundreds of pounds on your mortgage, bills, car payments, outstanding loans…etc, it severely restricts how much money you can save, and how much you can continue spending before you run out.
It is so important to stop hiding away from your debts. You must face them and take action. If you can pay off your loans quicker, you’ll save yourself, possibly, thousands of pounds worth of interest in the long run. The harsh reality of not paying off your debts is that the longer you leave it, the more you’ll owe.
Forget about cutting back on your daily Costa visits, this is where you are going to take the biggest step towards your financial freedom.
So, how can you pay off your debt early?
There are many ways you can do this, and I will suggest a few below.
- You can tackle the high-interest loans first.
Each loan you owe is a different amount, with a different interest rate.
By the numbers, the smartest decision would be to attack the highest interest rate first and then follow on with the others. You must prioritize your debts in a way that will benefit you most, and tackle each one by one. The reason you might want to take this approach is that the higher the interest rate, the more you will end up paying back over time, so the longer you leave it, to more it amounts. - The Debt Wrap.
This method takes into account human behavior. By tackling the smallest loan first, you can knock out your debts quicker. This means you are seeing faster results, that are likely to motivate you and build some sort of momentum to help pay off other loans.
A good habit to adopt is to organize your debts, and loans into a spreadsheet. This is something tangible for you to hold onto. The spreadsheet acts as a way for you to visualize what it would be like to be able to pay off your loans. Every time you pay off a part of your loan, the number gets smaller.
You could create this spreadsheet using excel. It’s not complicated. The spreadsheet could consist of 4 columns: Loan Name, Total Owed, Interest, and Monthly Payment. Eventually, the ‘Total owed’ column will reduce, and you will be able to delete the entity once it has been paid off. This, again, will keep you more motivated and more aware of what sort of outstanding debts you have left to pay for. Creating a spreadsheet like this will allow you to keep track of these finances, and manage your money better.
Step 3: Create a Savings Account
What would it feel like to have 6 to 12 months’ worth of expenses in your bank account, at all times? It would feel pretty good, right?
Just think about the kind of freedom, security, and stability you will have given yourself if you had this. Gone are the days where you would have to worry about losing your job and not having an income, or not being able to find any more clients for your business. I am sure, with at least 6–12 months worth of living expenses in a savings account, you’d have some peace of mind. This is called taking care of your future, which is why creating a long-term savings account is so important.
I am not insisting that suddenly you need to put £14,000 into a separate account and never touch it again. No.
The best way to go about this, that I would recommend, is to:
- Open up a spreadsheet Document
- Take into account all of your finances, including ALL income and ALL outgoings. (Fixed costs/Living Expenses, suchas Bills, Electric, Mortgage, Rent, Food, Phone Bill, Netflix…, and variable costs, such as the other things you purchase during that month…).
- Multiply your total monthly outgoings by 6. This is to get your first monthly goal.
- Then, multiply your monthly outgoings by 12. This is to get your ultimate goal.
This is a good way to view what your lifestyle looks like and to see the minimum amount of money you would need, a month, to continue to survive the way you do if all the money you had coming in, stopped.
Step 4: Start A Retirement Fund
A Retirement fund is often something you know you should do, but you feel like you never get around to doing it.
Well, how about starting it now?
A retirement fund is probably something your friends might talk about sometimes and whenever they do, you kind of just smile and let it slide. If you live in the UK, you might have been enrolled in the pension scheme, however, there are few other places that have access to this kind of luxury.
Personal Finance is often about making short-term sacrifices for long-term gain. By saving a little bit each year, you will be able to set yourself up for quite a dignified retirement.
Have you heard of compound interest? … Here is why I love it!
Say, for example, you have a lot of money. Then, over the course of the year that money is making more money because you’re investing it into stocks…etc. This means you’ll end up having more money at the end of the year. Next, you will be making more on top of that extra money that you have already made, and that money is making even more money the following year.
Let me put it into numbers — you’ve put £10,000 into a 401k, receiving a 10% annual interest return at the age of 20. If you never touch that money, until you retire — say, 50 years later, when you’re 70 years old, you will have compounded around £1,170,000, just from that £10,000.
You can use a compound interest calculator online, to see how much you could retire with based on your yearly savings.
Here is a site you might like to take a look at to start investing in small mutual funds and stocks. The idea of this is that you are in it for the long run. You don’t have to keep checking your accounts every other day, instead, you will check it over every 6 months or even every year. Of course, this isn’t as easy as it sounds. You will need to work on a good investment strategy and learn some of the terminology and concepts based on these kinds of investments. There are different things you would want to factor in, for example, your age, your income, how much money you think you will need when you retire, and most importantly how much risk you are willing to tolerate…etc.
Please know, I am not your financial manager, investor, or fiduciary. The information I provide you with is based on my own interest, research, and experience. Please, always make sure you do your own research and make a decision based on your own terms.
There are many ways you can work towards your financial freedom, this is just a few of those many ways. What works for one person, might not work for you.
Ultimately, it really depends on your risk tolerance levels, how much you are actually willing to save/invest, and how flexible you are with your expenses.
I want to recommend some books that truly have the potential to help you gain a better financial understanding of the concepts and strategies discussed above and more!
Dave Ramsey — Total Money Makeover
Ramit Sethi’s — I Will Teach You To Be Rich
Free Self Development Podcasts You Can Listen To
Reading books and listening to podcasts that will help you learn and grow will enable you to better prioritize your tasks and gain a better understanding of the things that work/ do not work for you.
Here, I have put together a list of FREE podcasts and ebooks that you can read/ listen to.
*This post contains affiliate links. This means that if you decide to purchase something through my links, I may earn a small commission, at no extra cost to you. Please know that I will never recommend or promote anything that I have not personally tried myself, or strongly believe in.
