Financial freedom is the goal that everyone strives for. Whether it’s paying the bills on time or banking an emergency savings fund, we all would like to move beyond the weekly grind. We all want to stop living paycheck to paycheck, of being trapped in a continual cycle of financial frustration and discontent. To be clear: the road to financial freedom is a long and winding one. It is, however, a road, and with the right directions, you can map a course that can get you to your destination.
You may have heard or read of many ways to work toward financial freedom. Setting goals are high on everyone’s list, but the key is actually taking those first steps, no matter how small, to move along the road in the direction of your destination. Though not comprehensive, here are 5 practical steps that you can take toward financial freedom.
1. The Monthly Budget: Know Where Your Money is Going
Make no mistake about it. Establishing a written monthly budget is the first step on the road to financial freedom. The emphasis here is on “written-monthly-budget!” The first time doing the written monthly budget takes the longest. Go back six months and list every single item you’ve spent money on, i.e., rent or mortgage, food, car, insurance, gas, phones, utilities, credit cards, restaurants, gifts, coffee shop, pubs, children, doctors, clothing, movies, pizza. Sort the list into three categories: the Necessary, the Nonessential, and Stuff. You need to determine what you can live with and without. Your goal is to identify the necessary and reduce or eliminate the excess spending on the nonessential and stuff. Once you ‘see’ where your money is going, you can control your spending habits. Spending less means you will have more money. Doing this will actually seem like you’ve ‘added’ another income, and you can begin to save.
2. Invest in Yourself (Think: Emergency Savings Fund)
On your list of necessary expenses, you should add ‘savings’ and start to ‘spend’ money on it. These days, opening a savings account is more than just putting money in another account at the bank. With a little research, you’ll find there are many online financial investing tools, e.g., the Betterment Fund, that can guide you and your hard-earned money to invest in your future. Open two accounts: one for your future and one for an emergency savings fund. Every frivolous dollar you used to spend can now go into one of those accounts.
3. Debt-Free Living
Though it may be good to have credit, it’s not good to carry debilitating debt. Your new written monthly budget will teach you to spend what you have, not what you need! Get a low-interest personal loan to consolidate all your credit card debts, and then cut up all your credit cards but one. Put that one aside for your safety net until you’ve built up enough in your emergency savings fund. Sell the car with the greater monthly payment and buy a used one outright with the equity or use the equity as a down payment on a used car for a lower monthly payment. Excessive debt is the biggest obstacle on the road to financial freedom.
4. Clear the Clutter
Clearing the clutter in your life allows you to make better decisions with fewer resources. Minimize and simplify your life. Rid yourself of the material possessions in your life that are not adding value to it. You are not depriving yourself of things in your possession that you have no need for. Sell it on Craigslist, eBay, in consignment shops, at flea markets or yard sales and put that money into your savings or pay down your debts with it.
5. Add to Your Income
Consider a side job or overtime. Rather than ordering pizza, deliver it. Want to go out on a Saturday night? Drive for Lyft or Uber. Then apply that second income to either pay off your debts or put into your savings.
The road to financial freedom is there waiting for you. All it takes is that first step. Know where your money is going, investing time and money in yourself, getting rid of the clutter and the debt. It may take two or three years to complete the journey, but once you’re there, you’ll be free.
Need some help along the way? Contact us at Tio Rico today to inquire about how our personal loans can help you achieve your financial goals!