Are you sick of living paycheck to paycheck? Are you tired of feeling like you’ll never have enough money to enjoy life?
If so, you need to develop a plan to escape your current circumstances.
What Is Financial Freedom?
Financial freedom is the ability to live life without worrying about how to pay for it. It means you’ll have money saved for your future, and plenty of passive income coming in to support your ongoing expenses.
9 Steps to Financial Freedom
You need determination to gain your financial freedom. It’s a long journey, not a get-rich-quick scheme. You need your money to work for you, not the other way around. These nine steps will ensure you reach your goals:
The first step to financial freedom is taking control of the money you have. You’ll most likely need to adjust your budget each month to deal with day-to-day changes in your life.
Creating and following a budget will show you where you’re spending money and where you can save. You’ll need to take a hard look at your actual needs versus your wants.
Understand that your wants are going to go on the back burner while you work on some of these steps. It’ll be rough at first, but it’s the only way.
2. Minimize Debt
You’ll never be financially free if you have debt breathing down your neck.
When creating your budget, dedicate extra money to paying your bad debt. By paying off a bit more than the minimum amount, you’ll chip away at your debt and pay it off faster. Focus on the debt with the highest interest rate. The interest is how they keep you trapped.
3. Save Money for Emergencies
Nothing will derail your journey to financial freedom faster than an emergency you can’t pay for. While there’s no way to stop a car from randomly breaking down or a medical emergency from arising, you need to protect your hard-earned progress by creating an emergency fund.
Putting money aside for emergencies should already be part of your budget. How much should you save? Some say six months of your salary, others say $10,000.
The more you have saved, the better you’ll feel about your future.
4. Only Buy What You Can Afford
When getting something you genuinely need, like a car, it’s easy to justify buying something outside your budget because it’s a necessity.
Don’t fall for that trap.
You don’t want to have more debt to pay off. So instead of a brand-new car, look for a used one you can buy in cash.
5. Save Money When You Can
By this step, you might be thinking, “What other ways can I save money that I’m not doing already?”
There are always ways to save money.
You’ve probably heard the annoying advice of not getting Starbucks every day, and you’ll suddenly have thousands of dollars saved—and that is great advice if you’re paying a 10x mark up on coffee.
Think of indulgences like Starbucks as a treat instead of a routine expectation.
Other ways you can save money:
- Stop buying brand name goods and start buying generic (there’s not usually a huge difference between them).
- Reduce the number of times you go out to eat.
- Make large meals so you can bring leftovers to work.
- Cut down on the number of streaming services you’re subscribed to.
- Reduce your energy consumption.
- Use coupons when you can.
6. Make Smart Investments
Now we’re at the money-making part of this journey. Part of your budgeting should include putting money aside for investments.
What does it mean to make smart investments? It means making investments that won’t let you down in the future. The easiest—and smartest—investments are in real estate and the stock market because they create passive income.
Before investing in either of these, do your research to learn about the industries. This way, you can avoid stupid mistakes like selling too early and losing money.
Real estate has tax and financing advantages. The rent you collect will not only cover the mortgage payment but give you a little extra income that can add up quickly.
Stocks can be a bit more difficult to understand, so do extensive research before you buy. You should also diversify your stock portfolio to not have all your capital exposed to one company or industry.
If you’re nervous about going it on your own, check out Derek Moneyberg’s stock investment class.
Bonus tip: If you’re working for a company that offers a matching 401(k), start putting money into it. This also makes your job more valuable because you’re getting your company to pay for your future.
7. Get Insurance
Insurance is crucial to protecting the money you’ve earned. A single lawsuit or accident can drain all your savings—and drop you into serious debt. There are different types of insurance beyond health, car, and life insurance that you should get.
- Homeowners/renters insurance
- Long-term disability insurance
- Long-term care insurance
- Identity theft insurance
- Umbrella insurance
8. Stay Healthy
Health has a surprisingly significant influence on money. Not only do sick days cost you money, but consider all the money you’ll spend on doctors and prescriptions. A gym membership and a healthy diet costs way less in the long run.
Plus, being sick in your dotage will burn through your hard-earned money faster than you can imagine.
9. Invest in Education
Educating yourself will prevent you from making foolish mistakes. You should be constantly learning new things so you can improve yourself and your financial position.
Look for a financial mentor, read financial news, follow stock exchanges, and take classes from experts.
Get a Full Education with a Derek Moneyberg Webclass
Reaching financial freedom can be a tricky process. If you’re looking for more direction, start by attending Derek Moneyberg’s complimentary stock market foundations webclass, covering how a beginner can start investing in the stock market.