Seven Steps to Financial Freedom

July 31, 2013
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When you hear financial freedom, what do those words mean to you?

Does it mean the freedom from having to work? Does it mean covering your life’s basic needs without worrying about the mortgage or a car payment anymore? Having more time to do what you really want?

No matter what it means for you, the road to financial freedom is paved with goals. The problem is, most people get so overwhelmed by all that is involved to achieve their goals that instead of moving towards them the get stuck right where they are. Well think of this article as your AAA Financial Freedom towing service and we are going to provide you with some tips to help you achieve financial independence.

Financial freedom and all that is involved with it can be confronting. And confronting is good. It means it is important. Remember the “Why?” with it all. Why are you reading this? Why are you working? Why are you saving? The “Why” is your financial freedom high beams. It allows you to see the milestone directly in front of you. Don’t worry about the turn you have to make 15 miles down the road, let’s focus on the road straight ahead.

Step #1-Set Financial Goals

If you don’t know where you are going, you have no chance of getting there. The 9 other tips will not matter if you don’t get the personal clarity needed. You goals have to have meaning to you. They are the engine block of the car, you motivating force. Set aside some time to really get clear about your financial freedom goals.

Step #2-Develop a Budget

Your money and your budget is the voice of your commitment. A. People often disregard budgeting for many reasons – it’s not fun, it takes time, we don’t think it’s necessary…yet your budget is roadmap as it that directs your monetary resources to the things that have the most value to you. Ask us if you are in need a great budgeting tool to help you get started.

Step #3-Start an Uncertainty Fund

This used to be called an emergency fund. The old way of thinking was put 3-6 months of your income or monthly expenses aside to be safe. But the old way is inadequate and your need for an uncertainty fund is growing. Ask yourself a few questions. 1. What is the level of uncertainty in your life? Is your career risky? What else do you worry about – There are financial uncertainties that you may need to deal with such as having to take care of your parents? 2. How can you deal with those uncertainties? What would happen if you lost your job or you business slowed down? What happens if you car breaks down? No matter where you are at, start setting aside $25 per pay period into a dedicated savings account strictly for the uncertainty in your life.

Step #4-Get Rid of Debt

No matter who you are, you need to stop spending more than you earn. Getting out of debt needs to be a priority as debt holds you back from financial freedom. Debt has a negative compounded interest rate whereas saving & investing has a tremendously positive compound effect. We are big fans of the debt snowball method which you can learn more about here. It can keep you on track as you take and is emotionally rewarding. Stop thinking about how you are going to get rid of debt, accept it, forgive yourself and create a debt repayment plan now.

Step #5-Save for Retirement

Retirement is by far the biggest expense you will have in your entire life. Financial freedom may mean retirement and maintaining your existing lifestyle without ever having to work again. That means you need enough assets and passive income to support your retirement lifestyle for 30 plus years (Assuming you retire at 60). You can’t start saving for retirement early enough. If you are an employee and your company has a 401(k) plan, at least get the company match. Or open up a Roth IRA. Every dollar in that account will grow tax-free forever. Setting goals and creating a retirement plan will help you determine that amount that you need to save for retirement in your budget.

Step #6-Automate your Personal Finances

According to a recent article in Money magazine, saving more money depends on ways to make it easy and automatic. When you make things easy and automatic, your remove the human element and thus it makes it more difficult to mess it up. Don’t just automate your savings, do it for your bills and investments as well. Not only can it save you money (and make you money), it’s a huge time saver as well. After all, time is the most precious commodity we have.

Step #7-Get Educated

“An investment in knowledge pays the best interest.” – Ben Franklin. At the end of the day, it’s your money we are talking about. The money that you worked so hard for. You don’t have to be an expert when it comes to personal finances but you should be educated. There are some tremendous resources on the internet and wonderful books that span every personal finance topic imaginable. Also, you can also hire a financial advisor who will take the time educate you about the steps needed to reach your goals so you can make informed decisions. Knowledge is power.

Achieving financial freedom all starts with the right mindset. Instead of obstacles you have opportunities. As Tony Robbins, Life Coach has said: “If you want to control the direction of your life, you must consistently make good decisions. It’s not what you do once in a while that has an impact on the direction of your life—it’s what you do consistently. Make decisions today about how you are going to live in the years to come.” The great news is that you can achieve financial freedom. Decide what step you are going to take action on today.