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Personal Financial Freedom
Personal Financial freedom is a term that often gets defined in different ways. For some, financial freedom means reaching a point in life where you no longer have to work to earn the money to cover your expenses. For others, “financial freedom” simply refers to any margin of money between your income and expenses that you are free to spend as you wish. Whatever your definition, financial freedom is the carrot that is constantly dangling overhead as we try to get a firm grip on our finances. In this article, we will try and give you some tips to get you on the way toward achieving your dream of being financially free.
First, there must be one thing that is understood. No matter how you choose to define it, or whatever form it takes, there is one condition that must always be met if you hope to ever achieve financial freedom: you must spend less money than you are making. So long as you are living paycheck to paycheck and pouring all your earnings into paying off debt that only deepens by the day, you will never be financially free. Live within your means. The things you may think you want are rarely worth the financial struggle you will ultimately buy yourself. A humble attitude now will be worth twice its weight in the future, when you have the dispensable income to indulge yourself as you wish.
Despite all the wonderful promises of financial institutions looking to make a buck, no one can achieve your personal financial freedom for you. That new investment firm with the funny advertising? Sure, they might help point you in the right direction, but at the end of the day only you possess the self-discipline necessary to walk the path toward financial freedom. A financial planner can give you all the tips in world, but can’t make you heed a single one. You have to be willing to take on the responsibility.
Come up with a spending plan. Many financial institutions offer free online tools such as savings calculators and debt calculators, which allow users to evaluate their monthly expenses and compare it against their monthly income, in order to help them create a solid budgetary plan. These online tools are simple to use, and extremely helpful; most will let you compile your budgetary plan into a pintable chart you can then use as your monthly ledger for making sure you are spending less than you’re bringing in.
Create a safety net. Before you start spending money on frivolous things you should always have four to six months worth of expense money stowed away for emergencies. This means the total amount of money needed to cover all bills, household wares, transportation needs, food, and all other necessary expenditures. By doing this, you pad yourself against emergency, or unexpected expenses, which can tear apart a spending plan in an instant, if not properly anticipated. Again, if you utilize an online savings calculator, you can quickly tabulate the amount of your finances spent on monthly expenses. Take that number and multiply it by six. That should be the size of your safety net.
Invest your money. One the quickest ways to achieve financial freedom is to have the money you’re already saving continue to work for you. If you can reach a point in life where your investments—be it 401K, a savings account, stocks, bonds, or more high-risk investments—are generating enough money to cover the majority of your expenses, this frees up your income for other uses; it can even free you from the need to earn income at all, especially if you are older and will enjoy the added padding of federal and state-sponsored aid (social security). Not having to work to cover the bills? What could be more freeing than that?
If you feel like a debt or savings calculator are not enough, sit down with a financial adviser and/or investment broker and learn what options and tools are available to get you closer to your goal of financial freedom.
Finally, stick to the plan. Self-discipline is the bottom line here. The reason so many people never achieve the sort of financial freedom they’d hoped for is because just as many of them never find the will to limit their spending, prepare for the unexpected, and invest where and when they can to ensure their money is generating more money, instead of just sitting around gathering dust. If you want to reap the reward of spending your money wherever, whenever and however you desire, you’ve first got to be willing to put in the work.
Topics: Investing |
