Last Updated on May 20, 2021 by MoneyVisual
Is it hard to bear the weight of being underwater in debt? Then chances are good that you need to be seeking ways to attain the financial freedom you rightfully deserve.
The truth is that you’re not alone in this predicament, as many of today’s Americans are experiencing the same problems you are; that is they have accumulated immense amounts of debt and are having a hard time paying back the money they owe back to their credit card companies, banks, as well as family and friends. You need tools and information that will help you make sound personal financial decisions.
Consumer debt in America hit an all-time record high of $14 trillion in the second quarter of 2019 and continues to gain ground as more and more Americans recklessly and frivolously spend their hard-earned money and continue to go more into debt.
Debt in and of itself isn’t inherently a bad thing though, as it can be used to leverage purchasing power to buy things you need; such as a home, a car, and other life’s necessitates that you won’t be able to comfortably live without. Only at the moment that you realize you can’t pay your debt back does it become a topic that you want to avoid like the plague.
What is Financial Freedom?
In short, financial freedom means that you have full control over your finances, are a frugal spender, and can generally afford anything you need or may want without having to get into debt that you cannot payback.
For example, if your dishwasher breaks and you need to replace it, you will be able to purchase a new one with no questions asked. Having enough money to cover any critical situation is part of what it means to live a financially free life.
Since you’re already making the necessary steps to do something about your debt by diligently researching your problem to attain financial freedom, here are the top 5 tips that will help you master the art of financial freedom.
1. Make a Budget
This may be an obvious tip, but few and far between actually know how to make a proper budget as making one requires determination, attention to detail, patience, and a tremendous amount of willpower to actually follow through on the budgeting plans they set forth.
A monthly budget that you stick with will help you stay within your scope of income, expenditure, and savings. A budget will also help you cut down on unnecessary spending which will allow you to save more money.
Keeping an appropriate budget you can comfortably live on will require a lot of discipline, but is definitely achievable if done correctly. Never spend more than the amount you make after taxes and you should be well on your way to adhering to the budgeting requirements you set for yourself.
2. Debt liberation
Once you’ve set up your budget, the next step would be to pay down all of your outstanding debt. Begin by paying off the most important debt first. The most crucial debt to pay off first would be the type of debt that accrues interest over time, such as credit cards, a mortgage, or a car loan.
The goal here is to eliminate any debt that you can’t use as leverage to make you more money. For example, some business owners may take a small business loan to buy more inventory than they can flip for profit, in which case the debt they take on is actually beneficial to them.
3. Automate Your Savings
The reason behind automating your savings is to avoid temptations in spending any extra money you have left over after paying down your debts and other expenses.
Automating your savings is one of the best ways to set some money aside for yourself after every paycheck such that you don’t have to rely on your own self-control. You can begin by enrolling in your employer’s 401K or retirement plan, and each payment period will automatically contribute to that savings plan.
You can also set up an automatic and recurring transfer out of your checking account into your savings account. You can have automated payments be initiated weekly, bi-weekly, or monthly of cash that will be directly deposited into your bank’s savings account.
4. Begin Investing Help Achieve Financial Freedom
If you truly want to master the art of financial freedom, then you’ll want to start investing as soon as possible. Before you begin investing, however, make sure you’ve saved up enough of a nest egg to make sure you can afford your risk investing money in the event you need to pay for emergency expenses such as medical bills or other unexpected things.
Compound interest is a magical thing and will work wonders if used correctly as your money can grow over time instead of sitting in your bank, idle, doing nothing. You can diversify your investment portfolio by investing in different instruments that include stocks, bonds, and cryptocurrency.
You can even set up automated weekly or monthly contributions to your brokerage account and then just sit back and watch your balance grow.
5. Talk to a Financial Advisor
Financial freedom is hard to achieve all on your own, so sometimes people opt for the chance to hire a financial advisor or firm that will handle their investment portfolio and assets for them. While this may be a pricey decision to make, sometimes the benefits will outweigh the costs as a financial advisor will know best as to where to allocate your investments.
A financial advisor will help you clearly define your saving and investment goals and will work side-by-side with you to create a blueprint that you can easily follow to make your financial freedom dream a reality.
Once you reach your main goal of achieving financial freedom, you no longer have to worry about money and instead can focus on living your life to the fullest. By making a budget, paying down your debt, automating your savings, investing, and talking to a financial advisor, you will be well on your way to mastering the art of financial freedom.