Finding Financial Freedom

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What comes to your mind when you hear the term “financial freedom”? Do you imagine a lavish lifestyle full of travel and fun? Maybe you dream of having money to contribute to your family’s education. Perhaps, it means that your day-to-day life doesn’t change, but you enjoy being debt-free. Financial freedom has a different meaning to each individual; regardless of how you define it, I’m going to talk about how you can achieve it.

Goals

What are your goals in life? What would you do if money wasn’t an object? I’ve said it before, but it bears repeating: you are more likely to achieve your goals – financial and otherwise – if you write them down. Doing so will help you visualize your pathway towards success and provide you with some accountability.  When you set your goals, consider how much money you need to fulfill that goal. This is where a detailed budget comes in handy. Record all of your debts and income so that you can accurately track your progress. It may also help to talk to one of our financial counselors to help formulate your plan.

Paying Down Debt

If you find yourself stuck in a cycle of debt and you’re paying too much interest, you will definitely want to address that. Come up with a plan to attack your debt so you can eliminate it. When it comes to paying down debt, there are a number of approaches. Choose the best for your unique circumstances. You may consider paying accounts with the highest interest rate first. Or, it may make more sense to tackle your highest monthly payment first so you can apply that to your next account. Maybe your go-to strategy is paying off the lowest balance and working up to the highest (or vice versa). Remember – this is your approach to financial freedom, so select a debt payment plan that makes sense and works for YOU.

I feel like I would be doing you a great disservice if I didn’t mention this next part… Some debt is good -such as a mortgage or a car loan. When you approach your vision of financial freedom as it relates to debt, ask yourself these questions;

1.       Do I have enough money in savings to cover this expense in full?

2.       If I make this purchase, can I pay it off before it accrues interest? This is especially important if you have a contract that includes a “same as cash” feature.

3.       Will this transaction positively or negatively impact my credit? Remember – the credit bureaus like to see different types of credit and a strong pattern of on-time payments. If you have been a “cash only” kind of person, you aren’t doing your credit report any favors. This may have unintended consequences for you down the line when you need a mortgage or a car loan.

4.       What’s in it for me? Maybe you have an awesome rewards credit card (like this one…) and making a purchase will help you to earn travel points, gift cards, merchandise, or cash. If you were already going to make the purchase, why not use that card to reap the rewards? Pay it off early and save yourself money, but don’t leave anything on the table.

Save Save Save

Don’t put off saving money. It is easy to put all of your extra income into paying off debt, but it is equally (or more!) important to save. If you have an emergency or unexpected financial crisis and you don’t have savings, you will need to revert to taking on more debt to survive it. The long-term goal of financial freedom is to not have that burden. Debt should be a tool you use to improve your finances, not something that drains you. Whatever you can comfortably save, do it! Invest in yourself and your future.

Don’t make the mistake of thinking that starting small with saving is not worth it. What may be the most important factor of saving is that you are developing healthy habits. Learning to save is not easy for everyone, so consider any amount saved as a win. You may even want to set up an automatic savings plan if you are comfortable.

If you have padded your savings accounts (yes, plural), you may also want to consider investing.  Determine how much risk you are comfortable taking and start small. Look into fractional shares if you are not ready to take the plunge, but still want to learn about basic investments. If you are unsure about what opportunity is right for you, you can speak to your stockbroker or financial advisor for advice tailored to your needs.

Saving doesn’t just mean setting funds aside in your savings account.  Use this opportunity to review your life insurance and estate planning. If you know that you want to leave money to someone or an organization when you pass, you will need to make arrangements for that. Spell out your wishes so that there are no questions about what happens when you are no longer around to answer them.  Be sure to talk to your family so that they know where to find all of the important documentation if something should happen to you.

Schedule a Check-Up

Nope, I am not referring to a check-up with your doctor (although you should do that too because medical bills are expensive!). In this case, I am talking about a financial check-up. Have a regular meeting with your spouse or loved ones to reassess your goals, budget, and current position. You can take this time to revise your plan. It is also a good idea to speak to your financial advisor regularly. There may be changes that they can impart to help you meet your goals sooner.

How are you planning to achieve financial freedom? I want to hear your thoughts.  Leave a comment below, or email me.

Krista Kyte is a personal finance blogger and personal banker with over 18 years of experience in the financial industry. Krista is passionate about helping our members understand their financial situations. She writes tips that will help consumers reach and maintain financial security, and start living the life they’ve always wanted.