For many people, Financial Freedom seems like a ‘pie in the sky’ dream, unattainable. But as someone who has had credit card debt, car loans, and student debt I can tell you that Financial Freedom is possible! But how can you attain Financial Freedom? The following 5 steps will start you on the path to fulfilling this dream.
What is Financial Freedom?
For most people, Financial Freedom means being free from debt. For others, it may mean being able to take annual vacations that are paid for before departure. For still someone else it could be having the ability to decide when they can retire without relying on Social Security. For our family, a bit of all of the above: being free from debt including our mortgage, having the means to take trips, and saving for retirement.
Two ‘takeaways’ from this article:
Everyone can attain Financial Freedom
The Steps to Financial Freedom are Easy to Follow
5 Steps to Financial Freedom
1. List Your Debts
This may seem simple but it requires you to be honest! You will need to find your bills and maybe get your credit report. Get a piece of paper and pen or use an Excel worksheet. You’ll need three columns: amount, interest rate, and term of the debt/loan (time, i.e. 5-year car loan). Organize the list so that the debts are listed from smallest to largest based on the amount of the debt. Then TOTAL the amount and put the figure somewhere where you can see it regularly like the fridge or as a picture on your phone. You want to see the TOTAL AMOUNT to inspire and motivate you on your Financial Freedom journey.
2. List Your Income and Monthly Expenses
Listing income won’t take as long as most people have one job and a set salary. Some people can regularly work overtime, earn commissions, or may have a second job/side hustle. Your expenses will be housing, utilities, groceries, gas, car repairs, clothing, entertainment like Netflix or Amazon Prime, eating out, etc. Determine your needs vs your wants. List the amount of money you’re spending on your ‘wants’. The ‘wants’ money is the amount you can now start using to pay off your debts.
3. Make a Plan for Paying Off Your Debt
Another honest conversation with yourself or your partner about what can be eliminated from the ‘wants’ in the budget so that you can start paying off your debt. Unless a debt is coming due, pay off the smallest debt first. Once you pay off one debt then use that money to start paying off the next debt. Based on your debt and income determine when you’ll be debt free except your mortgage. If you fail to plan, you plan to fail.
4. Stop Investing including Retirement Savings
What?! Stop Saving! Yes, whilst you’re paying off debt you NEED to stop saving as the interest you’re earning is not outearning the amount of money you’re losing by paying interest on your debt. I know this sounds crazy but you need to think long-term. Once you pay off your debt you’ll have more money to start investing/saving again.
5. Earn More Income
There are only two sides to this equation: reduce expenses and increase income. To increase your income you have a lot of options. Find a job that is higher paying. This may mean looking internally for promotion opportunities. Or you will need to join Linked In and have your resume updated. Anything around the house you’re not using anymore? If yes, start posting them on eBay – sell anything not nailed down. Find a ‘side hustle’. Thousands of people (literally) are working side hustles using social media to earn extra money. You may be working weekends and nights but it will be worth it to earn your freedom from debt.
In Closing
Financial Freedom is possible! I’ve been there and know how scared and powerless you’re feeling. You don’t need to rely on winning the lottery or becoming a celebrity. Financial Freedom is being attained but people like you every day by following simple steps but steps that take time. Use the formula or reducing your expenses and increasing your income to reduce your debt. Once your debt is paid then start saving to start building wealth and fulfiling your dreams.
