Financial Freedom In Basic Steps

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Step 1, create an emergency fund. Save up a thousand dollars and put it into an emergency fund, so you can use it in urgent situations. Emergencies don’t include vacations, beer money, or cigarette money. This money should only be used if unexpected expenses come up. For example, when you need to replace a water heater, then you go to the emergency fund. The great thing about having an emergency fund is that it starts to give you the feeling of financial freedom. For the first time in your adult life, you have some room to breathe. This step is the quickest way to finally start to gain some control back in your life.

Step 2, pay off your debt. About 80% of American adults are in debt. For me, one of the biggest problems with debt is that it restricts your monthly income. So when you’re paying $500 to $700 on student loans and car payments it restricts the amount of money you can save. The other thing I’ll say is that you will save thousands of dollars in interest if you’re able to pay off your loans fast. So what’s the best way to pay off debt early? There are a couple ways on how to do this. You can focus on the high interest loans first. Another option is called “The Debt Snowball”. This method focuses on the smallest loan first, we’re able to knock it out faster, which helps build momentum and motivate us to pay off other loans.

Step 3, create a vision. Think about how it would feel to have 6 to 12 months worth of expenses in your bank account at all times. Imagine the kind of freedom and stability you would have knowing that if you ever got injured, lost your job, or you couldn’t find anymore clients, that you’d be taken care of. Start a spreadsheet and list all of your monthly expenses. Rent, groceries, internet, insurance, utilities, and your phone bill. Putting this information into a spreadsheet is an excellent way to start to see the absolute minimum you need to survive on.

Step 4, start a retirement fund. Retirement funds are one of those things that you know you should do, but you haven’t done it yet. Retirement funds are one of those things that your friends talk about sometimes. By saving something each year you’ll be able to set yourself up for a nice retirement. In conclusion, once you’ve got an emergency fund, pay off your debt, load your bank account, and start your retirement fund, then you’re on your way to financial freedom.

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