Financial freedom is a goal most Americans cherish. What exactly does financial freedom mean? Simply put, a situation where money is not always on your mind. You don't have to worry about how to pay for obligations and how to achieve financial goals.
Saving is one of the foundations of reaching that state. Here are some tips to lessen your money stress and move you a little closer to the goal of financial freedom:
Take Stock of Your Present Situation
If a tiger showed up at your doorstep, you would have a few options. Hide from it, pretend it wasn’t there, run from it, face up to it, or fight it. The “tiger” of financial problems is something that sits on a lot of doorsteps. The best way to overcome it is to face up to it. You’ll never climb a mountain if you pretend it doesn’t exist. Take a good look at your financial situation as it is today. How much do you owe? How much do you earn? What are your spending habits? Are you saving for the future?
Decide What You Want for Your Future
Without a clear idea of what you are working toward, it’s highly unlikely that you’ll achieve it. Sheer luck might get you there, but unless you have specifically stated goals, a plan to go step-by-step, and keep moving forward toward them, your goals will probably not be reached.
Work Your Plan Every Day
Now that you have your goals clearly stated and a plan to get there, put them into action. Everyday. Do something that moves you toward that goal. And before you know it, you will have made major strides in the direction of financial freedom.
There are many ways to achieve your goal. Incorporate these good financial habits into your daily life, and you will find it much easier to make it a part of your future:
The Savings Mantra: Pay yourself first
To reach financial independence, you will need to put yourself first. Prioritize saving ahead of everything else. Save before you pay the utility bills, buy groceries, or even pay the rent. Paying yourself first encourages you to live on a smaller budget, and it’s a powerful saving habit. Funding an employer-sponsored 401(k) plan is a great way to get started. The contribution will be deducted right out of your paycheck, so you won’t even miss it. Living with what’s left after paying yourself is a great way to build wealth.
Get rid of debt
On average, each household with a credit card carries $8,398 in credit card debt. Total U.S. consumer debt is at $13.86 trillion. That includes mortgages, auto loans, credit cards, and student loans.
If you use credit cards to buy consumable goods and carry a balance, you are enriching the banks, not yourself. The first step toward financial independence is to get rid of high-interest debts and free your money to work for you instead of the banks.
Control your spending
The real key to financial independence is to spend less than you earn. Track your expenses for a few months and find out exactly where your money goes. Then see where you can cut out things you don’t need. Keep ‘lifestyle inflation’ to a minimum.
Look for extra sources of income
The more you make, the more you can save. We live in an era of side-hustles. There are so many ways to earn extra income today. Every extra dollar earned could be another dollar saved. Work both sides of the equation to widen the gap between spending and income.
Once you have some money saved, start investing and let that money work for you. That way you’re accumulating wealth over the long haul. A conservative, sensible middle-ground approach is the way to go in terms of long-term returns. Slow and steady wins the race, as they say.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.