Many people do not understand what it means to be a steward of wealth. It’s not just about debt, or keeping a budget but pro-actively focusing on your finances and more importantly keeping positive about your success. It is much more than writing a tithe check every month. But sometimes when it is discovered that such freedom depends on consistency it is like a distant fairy tale that is unreachable in this world. Here are 9 practical steps you can take to find financial freedom in your life. Here is a short guide on how to achieve financial freedom in 10 years.
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Define what financial freedom means to you
Before you can achieve financial freedom, you must define what that means to you. The FIRE concept – financial independence, early retirement – is now in vogue and refers to the ability to quit working a traditional job at a very young age. However, there are many other definitions of financial freedom, including the ability to pay bills with the remaining money or to have a fully-funded emergency account. “Almost all of them change this idea that you need enough money without the stress of money.
Steps to financial freedom:
1- Appoint a family finance officer.
If you are single, you can skip this step, but other families will have to nominate someone to serve as CFO. This person is not making financial decisions, but is the only monitor of progress toward goals and informs the rest of the family.
2- Open the correct accounts.
There is only one suitable account for all your money. Retirement cash must be taken into account for a 401 (k) or preferred tax IRA, and college savings are generally best kept in a 529. In the meantime, plan to separate your emergency fund from your other savings for not to be submerged unnecessarily. These are just examples but you should separate your income into several different accounts such a Investments, Long-Term Savings, Necessary Bills and Leisure.
Once you have set up your accounts, you need to create a system to make sure they are fully funded. Schedule regular deposits into all your savings accounts. Many employers direct deposit payment checks to multiple accounts, so you can redirect some of your income to checking accounts, regular savings, and your emergency fund. You can contribute directly to your 401 (k) through a payroll deduction.
4- Track your expenses.
If you currently live from Paycheck to Paycheck, it seems scary to set aside 20 percent of your money for emergency and retirement savings. You may need to start with a smaller size. To know exactly how much you can save, you must first understand how much you are spending. Take a month to find out where your money is going, from big bills to the few buckets spent on coffee in the morning.
5- Create a debt payment plan.
For most people, financial freedom means ending debt. While it can be difficult to own a home without a mortgage, credit card debt or even auto loans can be eliminated. It’s easier if you start by concentrating all of your extra money on one debt and making minimum payments on the rest. From a mathematical point of view, it may be wise to start with the debt that charges the highest interest rate. However, some financial experts recommend paying off debt with the smallest balance first to build momentum and motivation within yourself. Take the actions that help you to sleep better at night now, while saving some money aside for your future.
6- Build a suitable emergency fund.
It may be tempting to use savings to pay off debt faster, but that approach may be delayed. “Without that emergency fund, your high-interest debt is likely to increase. Instead of prioritizing your debt over savings, or alternatively, focus some of the available cash on each priority each month.
7- Focus on financial education.
The more financial information you have, the easier it will be to make money management decisions. From financial websites to books, podcasts and personal seminars, information is available today. However, for every website that offers sound financial advice, there may be other questionable investment strategies that they would suggest.
This final step is not about creating your own financial freedom, it is about guaranteeing the freedom of your heirs. After a lifetime of managing money properly, you don’t want your money to be in the pockets of relatives you never intended.
9- Steps to achieve financial independence.
The important part is to do this over and over again and build up the consistency. Don’t worry about if you have a little money or a lot right now – just keep building your financial habits like a bodybuilder growing a muscle at the gym. Here is a summary of what you should do to break free of your bad money habits and live comfortably:
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