We have all dreamt of being financially independent and never having to work again. To have enough money to do the things we want to do – without borrowing it from others.
However you define your own version of financial freedom, here are 5 general steps that will help you get there.
What is financial freedom?
Financial freedom means something different to everyone, but generally speaking financial freedom means having the ability to live the life you want.
For many, financial freedom means being financially independent, whether this is from family, the bank or the government, or all three.
But for some people, it means having enough money to go on family holidays every year, for others it’s having enough money to pursue their entrepreneurial dreams, and for some it’s simply paying off the mortgage. Though all of these dreams look different, the recipe behind them all is the same:
“Have enough money to do X.”
How do I get it?
First you have to define what financial freedom means to you and why having it is important.
We get it, it sounds cliché, but by putting those down in writing, you’re already a hell of a lot closer to financial freedom than you were five minutes ago because you now have something to work towards.
Next, you have to work out how you’re going to achieve it.
This can involve putting together a savings or investment plan which can also mean bringing in outside financial assistance from either a financial planner or an investment advisor. Together you’ll clearly define your personal and financial goals and map out a road to achieving your already defined financial freedom.
See: See how your finances are going, and how you can improve using our free Financial Health Check. It’s just 5 questions!
Relieve your debt
One key stop on this road will be focusing on relieving any existing debt, especially high interest debt such as credit cards and personal loans being used to fund your lifestyle.
One method of eliminating this debt is setting up a dedicated fund or account that you transfer a set amount of money to in regular intervals and which pays off all of your loans until your are completely relieved of debt.
Create an emergency fund
Another popular road stop used to achieve financial freedom is to start by establishing an emergency fund.
Setting up regular bank transfers to an ‘emergency’ account every month will not only give you peace of mind, but it’ll ensure any unexpected financial costs won’t turn your life upside down when they happen. Being prepared means being in control, even it means sacrificing a few almond croissants a week to afford it.
Plan for retirement
Knowing that you’re heading into retirement with enough money to not only live, but live in comfort, is a big key to unlocking financial freedom for many.
Make a budget
You’ve no doubt had this phrase repeated to you by a range of different adults who claim to have your best interests at heart – and it’s for good reason.
Having a budget means you’re aware of what you’re spending and where your money goes, and it allows you to identify areas where you could be saving more. Your budget will also give you a good indication of whether your pre-defined ‘Financial Freedom’ is realistic and achievable.
Earn extra income
If your budget’s telling you that buying a holiday house in Sorrento in ten years is an unrealistic goal given your current income and financial situation, then don’t give up on it – earn extra income.
One way you can do this is by picking up a second job or doing some freelancing on the side. Another way is to make your existing savings work harder for you by investing them the right way exchange-traded funds are a great way to build investment portfolios to suit your objectives.
If you don’t know much about the stock market or you don’t have the time to research and manage your own portfolio, you can employ the help of a low-cost investment management service, like Clover, to monitor and rebalance your portfolio when needed, so all you have to do is kick back and relax.
Whatever financial freedom looks like to you, the sooner you sit down and map out the path to achieving it, the sooner you’ll reach it.
Not sure if you’re to start investing? Find out with our free Financial Health Check today.