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By Jennifer Thompson

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July 17, 2021

We all want financial freedom.  And, while money can’t buy happiness, it can provide you with options. Ir can also relieve a lot of stress. While being rich won’t fix every problem in your life, becoming financially free means you won’t have to base every decision solely on money. You don’t have to stay in the job just because you need the money. You’re not stuck in an abusive relationship for financial reasons.

Having money gives you the freedom to do some of the things you enjoy. Like travel, go to a hockey game, or start your own business. The best part about having money is not having to worry about not having enough money.

The steps to get there are simple. So let’s get started.

 

Step 1 Create an emergency fund.

Start by saving your first thousand dollars. Put it into an emergency fund savings account that you only use in dire circumstances. This money should only be used when there is an emergency – such as a leaking roof or if the car breaks down. Use money set aside to pay for this instead of using your credit card, which would only get you into debt.

As you get comfortable with the habit of saving, increase your emergency reserve to an equivalent three months income. Set aside funds for unfortunate events that may stretch longer than a one-off payment. Such as job loss or sickness. 

A survey conducted by Schwab found that 36% of Millennials don’t have any money set aside for an unexpected expense. The habit of saving is the first step to feeling a sense of financial freedom.

 

jennifer thompson

Step 2 Pay off your debt

Jennifer Thompson

Almost half of Americans carry a balance on their credit card. If money provides you with freedom, debt restricts your options to do what you want to do. There are basically two ways to eliminate debt. The first is to pay the loan or credit card with the highest interest rate. The second strategy is to pay the loan or credit with the smallest balance owing. Doing this would create a snowball effect, which creates momentum to tackle other debt. The danger to paying off debt is racking it up again. But with an emergency fund in place, you should not have any reason to rack it up again. If you need to replace your furniture, buy a new car, try saving for these instead of getting a loan.

Jennifer Thompson Dealing with Debt

 

Live Within Your Means

The biggest problem people have with money is that they spend more than they earn. Look at your credit card statements (Copy of cashflow snapshot) or bank statements for the last three to six months. It should give you a clear idea of where your money goes.

Create a realistic budget and stick to it. It may mean saying ‘no’ to compulsive shopping. Learn the difference between what you want and what you need. Become aware of your spending habits. Are you an emotional shopper? Do you shop when you’re bored, sad, or lonely?

Contribute to A Retirement Fund

JENNIFER THOMPSON

 

The last step towards financial freedom is to contribute to a retirement plan. Invest in vehicles meant for the long-term  Many retirement plans are set up so your employer will match your contribution.

If your retirement is not for another 10, 15 or, 20 years, invest in low-cost, growth-oriented index funds or exchange-traded funds meant for the long term. With the effects of compounding, your money will grow substantially more than what was contributed.

Have a Written Financial Plan

Money means different things to different people. Identify three of your top financial goals. It could be to pay off debt, build a retirement plan or save for the down payment on a home. 

Decide when you’d like to accomplish these. Seek advice from a financial advisor who can keep you on track. Achieving financial freedom does not have to be complicated. You just have to decide to start soon.

This post contains affiliate links. I may receive a commission for products bought (at no additional cost to you).

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