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Financial freedom may seem like a pipe dream for many, but in reality, it’s well within reach for anyone to achieve.
No matter how close (or far) you may be, there are always impactful things you can do to make yourself independent of your wealth.
In this guide, we’ll be diving into 11 crucial steps to achieving financial freedom in your lifetime.
What is Financial Freedom?
Financial freedom can be defined as having accumulated enough wealth to afford the lifestyle that you desire. It means consistently working towards increasing your savings, expanding your financial investments, and growing your net assets to ensure you are financially free to make your life choices unmotivated by cash.
Financial freedom means you can choose to retire early, travel the world, settle down and spend time with your family, zone in on your career, or a combination of everything – without being driven by your paycheck each month.
1. Outline Clear Life Goals
There is no point if you are working towards financial freedom if you don’t have a ‘why’ to drive you. Ask yourself, what do you want to be independently wealthy for?
- Want to live a debt-free lifestyle?
- Excel in your dream job without worrying about the paycheck that comes with it?
- Cut down on your working hours (or retire altogether) to spend more time with family?
- Have the funds and ability to travel more?
- Retire early?
Whatever the ‘why’, write down your life goals. Break them up into measurable goals too. What will you be doing 5 years from now to work towards financial freedom? How about 20?
2. Make a plan for your budget
figure out what you need and want, and make a budget. Financial freedom is a state where you have enough income to cover your living expenses without having to worry about money. For many people, financial freedom is the ability to retire early or live a lifestyle that doesn’t require working.
The first step towards this is to create a financial plan. This should include your income, expenses, savings, and overall financial goals. You could go a step further and outline your goals for one year from now, two years from now etc.
Great apps for getting this all in one place include:
Once you have a clear understanding of your finances, you can start working on ways to reduce your expenses and increase your income.
3. Tackle your debts
You might see some people advising you to use your income to invest and grow your assets – but if you have debt hanging over your head, you’ll never be completely financially free.
Take a look at your credit card debts and start addressing them yesterday. If you have a large amount of debt stacked up to your name, you might want to discuss a debt repayment plan with a financial advisor.
You could either opt to pay off your smallest debts first, snowballing on to your largest debts. Or, alternatively, you might choose to pay off your debts with the highest interest (avalanche method).
Once your debts are wiped clean, you can take joy in knowing that the number in your bank account is your only.
4. Cut back on unnecessary expenses
Make wise financial choices. This means living below your means, investing in long-term assets, and staying disciplined with your spending. When you make smart financial choices, you’ll start to see your net worth grow. And as your net worth grows, so does your financial freedom.
Everyone has financial goals, whether it’s saving for a rainy day fund, taking a dream vacation, or buying a new car. Achieving the financial freedom to achieve your goals could mean eating out less often, downsizing your home, or getting rid of your cable subscription. Even small changes can make a big difference in your financial health.
As you get closer to your financial goals, you may find that you have even more motivation to cut back on unnecessary expenses. Take a look at your budget and see where you can start making some changes.
It’s never too late to start working towards financial freedom.
4. Start paying yourself first
Paying yourself first means putting a set amount of money into your account before anything else. Ideally, you’ll set this up to come out of your account automatically, on the day you get paid.
This ensures you don’t get accustomed to living with that extra cash available – you have to make your budget work.
Meanwhile, that money is slowly but surely building up in whatever savings pot you’ve chosen for it behind the scenes.
5. Invest your money now
Perhaps the most important principle is to invest your money wisely. This means putting your money into assets that will grow over time, such as stocks, real estate or mutual funds.
It also means avoiding high-risk investment strategies, such as gambling or day trading. By investing wisely, you can gradually build up your financial resources and eventually achieve financial independence.
6. Live below your means
Living below your means is often touted as the key to financial freedom. And it’s true that spending less than you earn is a great way to save money. But there’s more to it than that.
Living below your means also means making smart choices about how you use your money. It means being mindful of your financial goals and aligning your spending with those goals.
It means resisting the urge to keep up with the Joneses and instead focusing on what will make you happy. Finally, it means creating a financial plan that will allow you to live the life you want.
In case you hadn’t realised by now, having a plan is crucial.
Having a plan of action is quite possibly the most crucial first step to achieving financial freedom.
7. Stay disciplined with your spending and saving habits
Financial freedom doesn’t come easy. It takes discipline.
Just like getting in shape requires discipline in terms of diet and exercise, getting your finances in order requires that you be disciplined with your spending habits. That means being mindful of every purchase, large or small, and asking yourself whether it is truly necessary.
It means being willing to forego instant gratification in favour of long-term financial security. It means making tough choices and sacrifices now so that you can reap the rewards later.
8. Expand your financial education
If there is an area surrounding managing your finances that you feel like you’re lacking, it’s important to keep educating yourself.
Whether that’s investing, real estate, credit card management, budgeting, or something else – make sure you’re taking steps now to stay on top of your financial education. These books on financial freedom are all fantastic ways to educate and inspire yourself to stick the course.
9. Be savvy about your spending
Maintaining a frugal mindset is a key part of earning your financial freedom. Being frugal means being savvier about your day-to-day spending, and above all, using your money in a way that gets the most out of it.
These posts might be helpful for establishing more frugal habits:
- Frugal Recipes: 8 Go-To Cheap Weeknight Meals
- Frugal vs Cheap: The Key Differences & How To Stop Being Cheap
- Simplify Your Lifestyle: 5 Tips for Frugal Living
10. Create additional income streams
These days, having one income stream is simply not enough if you truly want to achieve financial freedom (or at least, at an age where you can enjoy it!).
These guides might help you diversify your income:
11. Be patient
Achieving financial freedom is no small feat. It requires patience, discipline, and a willingness to make sacrifices. If you’re willing to put in the work, it’s achievable.
There are a number of things you can do to get on the path to financial freedom, but one of the most important is to start saving early. The sooner you start putting money away, the more time it has to grow.
As your savings grow, so does your financial security. So if you’re serious about achieving financial independence, start saving now and be patient – your future self will thank you for it.