Seven Quick But Steady Steps to Financial Freedom
We spend a lot of time planning for different aspects of our lives, such as our careers, having a family, leisure trips but many of us fail to build a plan to achieve our financial goals.
In order to fulfil the other aspects, we need to foremost have a financial plan. If you would like to stop wondering about whether you’ll ever realize your financial goals and build a plan to actually reach them, this post can help. Read on to follow each step and it will give you a clear picture on how to build a proper financial plan. All you have to do is focus and further apply the steps religiously and in no time you’ll reach your goal of Financial Independence.
Step 1: Set specific goals
The road to any achievement is paved with goals. If you don’t know why you’re doing it, it’s too easy to get diverted. But if you set goals, they can guide you even when things get tough. When you have to make decision, your goals can help you stay focused on what’s important. You can set small goals like saving up for the mini holiday for your family or bigger goals like shifting to a bigger apartment. For your goals to be effective, they must be personal.
Tip – Web based tools come handy when it comes to setting goals methodically. Do prepare yourself for setbacks. You may meet your goals little after then when you wanted or make mistakes on your way. But nothing should stop you to move on.
Step 2: Track what you spend
The way you keep a track on how much you are earning, it is also important to keep a track on how much you are spending. This is the step that makes the biggest impact. You can simply use a notebook or if you are good with online tools then pick any from the various ones available. It doesn’t matter how you track your spending — the most important thing is to do it.
Tip – Make it a habit. Record your transactions as soon as possible. Whichever method you choose, stick with it.
Step 3: Map out a budget
Once you start tracking spends and have done it for few months, you can use the data to create your monthly budget. This step can provide a roadmap for your money. And you don’t really need to follow any complicated method. Just save 20% of your income at the start of the month, spend 50% to needs and rest to wants.
Tip – After you map out a budget, your goal should be to spend less than you earn. This is the fundamental money skill and basis this you can hope to build your wealth.
Step 4: Optimize your accounts
Saving up 20% of the earning or spending less than you earn will not help you completely if you don’t optimize your accounts. It’s important to choose accounts and systems that work for you. For instance you can open an online high-yield savings account or use rewards of debit or credit card. Look for a long term association – one that suits your requirement.
Tip – When optimizing your banks and cards, consider using multiple accounts at each institution. For example, one for you savings, another for your small goals (vacation remember) or emergency fund etc.
Step 5: Open an emergency account
We all save for fortunate things in life i.e. future car or home. But when it comes for an emergency situation, we either find ourselves in a fix or we exhaust our savings fund severely. So after you’ve optimized your accounts, make it a priority to save for emergencies to avoid such crisis.
Tip – You can simply open an online high-yield savings account and even if you save just 4-5% of your income every month, that would suffice.
Step 6: Get rid of debt
If you are struggling under a heavy debt load then it should be your priority to unload it. You need to separate essential and non-essential debts and after prioritising secured debts, make sure you start by clearing the highest-interest debt first. It may be worth consolidating your debt into one loan so that you can keep up with all your payments easily.
Tip – Stay positive. By taking pro-active steps and being open about your debts you can remind yourself that you’re taking steps towards getting out of the red.
Step 7: Earn extra bucks
You can meet a lot of your financial goals by reducing your expenditure and using the above steps. But nothing is better than a boost in income. There are various ways to add more zeroes to the salary or income you draw. You can ask for a raise in your current office or you might even switch employers after you have dedicated good amount of years at a certain place. You can even think of working as a freelancer to earn little extra that will get you out of debt or help you save for a house.
Tip – Make best use of one of your hobbies. Yes, it’s possible to have money-making hobbies like writing, making handicrafts or painting. That way you can live your passion and earn extra from it.
If you follow these steps to financial freedom you will be well on your way to live that dream lifestyle that you have always imagined without having any financial concern. So start today and make it a reality!