1. Get a Clear Picture
Many people avoid their financial situation because it’s too overwhelming for them to bear. However, there’s no way you’re going to truly achieve financial freedom when you don’t know your numbers. Therefore, it’s time to make line items that clearly state the debt you carry. Include your student loans, car payments, and credit card debt. If you have an outstanding bill from a debt collector, put it on the list. If you have a mortgage, put that outstanding amount as a line item as well. You have to get clear on what you owe if you’re going to set your financial freedom plan in motion.
Next, you’ll need to consider your current expenses and your income. Depending on your situation, you might need to emphasize one of these considerations over the other. Granted, you’ll still need to implement strategies to make more and spend less. Still, it’s essential to get an understanding of your expenses and your income to detect any chinks in your armor.
Notice any patterns. If you overspend during the last week of the month, take note of why. If you don’t have enough money to cover all of your expenses, it’s not just about cutting back. In order to achieve financial freedom, recognize that an abundance of money is an essential component within the big picture.
2. Set Achievable and Time-Sensitive Goals
If you’re used to living from paycheck to paycheck, the idea of financial freedom might already feel like a lofty goal. Thankfully, there are practical ways to break everything down into achievable goals. Depending on the scope of your financial situation, it might take several years before you can be financially free.
It’s important to note that financial freedom will look different for everyone. If you’d like to quit working to stay at home with your children or grandchildren, you’re able to do so. If you’d like to go on a mission trip for six months or live in another country for half of the year, you’re not financially dependent on a location-sensitive job to make this happen.
If you don’t have any money saved in an emergency account, you can start by saving $1,000. Look at your finances to see how quickly you can put that money into your account. You may need to find a part-time job, sell some items around the house, or look for a full-time job with better pay. These are great action items to get the ball in motion.
Think about when you were in high school or college. Your educational career was mapped out for four years. You knew the classes you’d need to take and the moves you needed to make for the next four years. Apply the same logic to your financial life by setting short-term and long-term goals.
3. Always Pay Yourself First (Save)
Before you pay bills or spend in other ways, pay yourself first. You pay yourself by setting aside money in a savings account. Whether you’d like to face it or not, the fact is that rainy days will come. When you have a rainy day fund set aside, it will help you ride through the storm more easily. Whether you get sick or lose your job, you’ll at least have money set aside so you can focus on getting back to normal without incurring a greater financial burden.