10 game-changing financial freedom tips
Fight the January headaches by following these easy steps
07 December 2018 | Supplements
1. Understand where you’re at
You can’t achieve financial freedom without knowing your starting point. Looking at how much debt you have, how much savings you don’t have, and how much money you need can be a depressing reality. But this is a valuable step in the right direction.
Compile a list of all your debts: mortgage, student loans, car loan, credit cards, and any other debt you may have accumulated. Don’t forget to include any money you may have borrowed from friends or family members over the years.
How much debt do you have?
If it’s a big number, don’t freak out, I promise I’ll share some ways to pay that later in this article. If it’s a small number, congratulations!
Next, take a look at all the money you have saved up.
Compile a list of all your savings: savings accounts, stocks, company stock-matching programmes, company retirement-matching programmes, and retirement plans. Then we’ll add the recurring monthly payments you receive such as salary, side hustle money and so on.
Keep these numbers in mind as we work through the next few financial freedom tips.
2. Look at money positively
Debt can definitely be a little bit discouraging.
But remember that money is a good thing, even if it seems to carry a lot of burden right now.
You deserve to achieve financial freedom.
According to ‘You Are a Badass at Making Money’ by Jen Sincero, people who don’t make a lot of money often feel shame when it comes to making money. And so the biggest obstacle that many people experience when it comes to making money is that they feel like having money is bad. Many feel guilty for having it and guiltier for wanting it. Sincero said about money: “We use it every day to enhance our lives, yet we always seem to focus on the negative about it.”
Money is simply a necessity like food or water. It helps you buy the things you need and live the life you want.
To experience financial freedom, you’re going to need to look at money as a tool to help you achieve your dreams, fuel your energy and live a stress-free life you can enjoy.
Because if you view money negatively, you’ll subconsciously sabotage your chances of making it and keeping it.
3. Write down your goals
Why do you need money? Do you want to get rid of debt for good? Are you desperate to escape the nine-to-five grind? Is there a place you’ve always wanted to travel to? Do you need to save for a wedding, kids, or retirement?
When I achieved financial freedom, it was because I tied it to an emotional goal. My goal was to get out of student loan debt and save for my first home. And honestly, it was a euphoric experience watching the debt dwindle away and my savings rise.
I got so excited by seeing the numbers change that I worked harder to make more money to see a bigger change in my personal finances. Would I have achieved my goal of financial freedom if I hadn’t tied the goal to something emotional? Probably not. I was desperate to get out of debt and move out of my parent’s house. That desperation kept me motivated throughout my journey.
Knowing exactly what you want to achieve makes achieving financial freedom a million times easier.
4. Track your spending
An important step toward financial freedom is tracking your spending.
You can use a tool like Mint, which will let you know how much money you’re spending, which categories you’ve overspent in, how much money is in all of your accounts, and how much debt you have.
Another cool thing about Mint is that it allows you to set goals within the dashboard. You can keep track of your goals and know the exact month you’ll be expected to hit the goal based on how much money you put in. Thus, keeping you accountable and reminding you to keep putting money towards it for you.
After using Mint for one month, I managed to save some extra money towards my new wedding fund goal. Mint helped me stay focused on my goal and pushed me towards creating more passive income to hit my financial milestones.
5. Pay yourself first
You’ve probably heard the expression “pay yourself first”. But in case you haven’t, “pay yourself first” means putting a specific amount of money in your savings account before paying anything else, such as bills. And the act of paying yourself first has helped countless people inch closer to achieving financial freedom. Why? Because if you want to pay yourself US$1 000 per pay period first, then whatever’s left over needs to go towards bills. And if you don’t have enough to cover those bills, then you’re forced to pick up a side income to make up the costs.
By paying yourself first, you guarantee that you’re always putting money aside to invest in yourself. By doing the opposite, you only get whatever is left over, which usually isn’t substantial enough to help you experience financial freedom.
You can pay yourself first in other ways too. For example, if your company has a retirement savings programme, you can ask to have money withdrawn for your retirement. That way you’re investing in yourself and your future first. The money gets deducted from your pay so everything that’s left over is money that you can put aside for your bills and expenses.
6. Spend less
In 1958, Warren Buffett purchased a five bedroom home for US$31 500 and hasn’t moved out of it since. His net worth? An astounding US$90.3 billion. He can afford a bigger and more expensive home. But his frugality might very well be the reason why he’s one of the world’s richest people.
Kanye West, on the other hand, isn’t afraid to flaunt his money. He lives in a US$20 million mansion. And at one point, with US$53 million of debt, he decided to ask Mark Zuckerberg for US$1 billion… on Twitter.
The difference between the two super successful gentlemen? Buffet didn’t spend more than he needed to, and West spends money he doesn’t have.
The truth is, plenty of rich people don’t look like rich people. Zuckerberg literally wears the same boring T-shirt and jeans every day.
Buying less stuff can actually help you get richer.
By spending less, two things work in your favour. One, you’ll have more money to put aside for your financial freedom. Two, you’ll learn that you actually need a lot less stuff to survive, which also helps you put aside more money.
7. Buy experiences not things
Life’s short. It’s not about hoarding all your cash until you’re 65. You’re allowed to enjoy life while you’re alive.
Ultimately, the things that’ll help you live a more fulfilled life will be the experiences you have, not the products you own.
And are the things you buy making you happier over the long-term? Does the debt you have from buying a bunch of stuff make your life easier?
What’s your happiest memory? What were you doing? Who were you with?
Maybe you have a friend you love working out with. Invite her over to work out to a YouTube playlist at home for free.
You’ve always dreamed of travelling to Rome. You’ve been saving up money for a year to experience your dream vacation. Go on that vacation feeling guilt-free. You didn’t go into debt for it, you’ve earned it. Or you can become a digital nomad and travel the world while working abroad.
Life is made up of moments. The best ones come from quality time spent with friends and family. While some products can help bring you closer to your family (like a weekly family video game night) most of them don’t add much value.
8. Pay off debt
Some people will tell you it’s wiser to invest your money in stocks instead of paying off your debt. If you’re an expert stock picker, maybe that’s true. But if you’ve never invested in stocks before, you could wind up with more debt.
While paying someone else isn’t as glamorous as having money in the bank, it does bring you closer to financial freedom.
There are two main methods of paying off debt: Snowball and avalanche. Snowball is when you pay off the smallest debt first. Avalanche is when you pay off the debt with the highest interest rate.
Paying off a big debt lifts a massive weight off your shoulders. After paying off your debt, you see the amount of money you have in the bank rise. It’s an awesome feeling watching the number climb (even if you had to watch it fall at the beginning), and it keeps you motivated to continue growing it.
9. Create additional sources of income
Okay, so at this point, you’re probably thinking: “My debt is a lot more than my salary, how can I pay it off if I don’t make enough?”
If you’re serious about financial freedom, you’ve got to sacrifice some blood, sweat, and tears.
Your nine-to-five might not cut it. If that’s the case, you need to step it up and look for money outside your current job.
Some experts recommend having seven streams of income. If you have a nine-to-five job, congratulations, you have one, only six more to go!
Now, you can look at your sources of income in two ways: active income (trading time for money) or passive income (money that can keep coming in, even while you sleep).
If you trade your time for money, you’re limited by the hours of the day. Here are a few side jobs you can do to earn an active income.
10. Invest in your future
The last financial freedom tip is an important one. Say you follow the advice and recommendations in this article, get out of debt, and grow your savings. That might be enough to help you out right now. But what if the unexpected happens? Will you be prepared for it?
It’s important to set aside money for rainy days, retirement, and (sorry to be morbid here) in case you die, to help ensure your family doesn’t drown paying for your funeral, debts and taxes. Okay, now let’s get back to that happy place.
An emergency fund is only for unplanned emergencies like a tree crashing onto your house, a car accident you need to pay for out of pocket or a visit to the hospital.
By setting aside money for rainy days and retirement, you’ll be less likely to end up back to where you are now - wishing for financial freedom.
Nicole Martins Ferreira