So, what exactly is financial freedom?
It's about being rock-solid financially, ready to tackle any curveball life throws your way—whether it's a home repair, a health hiccup, an unexpected layoff, or even a pandemic.
But here's the kicker—it's not a license to be careless with your cash. It's all about mastering the right know-how, tools, and habits to ace your financial game.
In a nutshell, financial freedom is about having a savvy relationship with your money—how you earn it, spend it, nurture it, and invest it. It's as straightforward as that. Keep reading, and you might discover some useful resources.
Now, let's jump into the 12 steps to make it happen in 2024.
So, the first step is as simple (and complicated) as understanding your finances. It consists of knowing where you stand financially. The suggestion here is to take 10 minutes, sit down, and list your monthly income along with all your monthly expenditures: housing, transportation, food, services, apparel, healthcare, insurance and pensions, loans, entertainment—everything. The more details you include, the more beneficial it becomes. You can update it whenever you record or remember a new expense. Keeping track of your spending is the initial step to figuring out if you’re spending more than you should, especially on something completely unnecessary.
To turn your dreams into reality, you've got to see them crystal clear. That means getting hands-on. So, as March kicks in, we're encouraging you to grab a pen and paper and list out your 2024 goals. Be detailed—specifics boost your chances of hitting the bullseye. Then, set deadlines for each goal and smaller checkpoints along the way. Break down how much cash you need for each goal and milestone and jot them down. Place your 2024 goals sheet right on the front of your monthly budget or in a spot you'll see daily, and let's make those dreams a reality!"
Now that your spending is clear, and your goals are set, it's time to dive into your budget. It's a must-have tool if you're serious about hitting financial freedom in 2024. Calculate your net income – that's your take-home pay minus taxes or other deductions like insurance, medical coverage, and taxes. Once that's done, let's move on to step 4.
This rule, popularized by Elizabeth Warren, is a gem for mapping out your yearly budget. It's straightforward: allocate 50% for needs, 30% for wants, and 20% for savings and debts. The real trick? Knowing what falls into each category so you can trim the fat if necessary. It boils down to distinguishing between things you need and things you want. For instance, if you commute daily, gas falls under needs; and music or streaming services? Those are wants.
The moment you realize how much you're spending compared to what you want to spend, it's like a total eye-opener. So, armed with this rule, you can finally craft your budget.
With those earlier tasks checked off, it's crucial to stick to the budget and tip your hat to the 50%, 30%, 20% rule. The discipline needed to stand firm in your decisions is key. But that determination also comes from nailing point 1—knowing exactly where your money is going and being honest about what you're willing to give up. It doesn't mean axing your daily to-go coffee on your way to work, but understanding how much you're dropping weekly, monthly, and yearly. This way, you can, for instance, strategically plan your spending by snagging Starbucks discount gift cards or any restaurant gift card at the lowest discount. This approach helps you decide whether to pull back or simply gain a clear picture of how this small choice impacts your budget.
Paying loans on time and in full might feel like something your mom, dad, or favorite aunt would say. But, as classic as it sounds, it's crucial to stress the importance of paying your credit card bills on time and covering the whole amount. Credit cards are notorious for their sky-high interest rates. Piling up debts and just making the minimum payment can steer you right toward a breakdown rather than financial freedom. Even with lower interest rates on things like student loans or mortgages, it's still wise to pay the full amount; it plays a role in shaping your credit score
Ever wonder what that is? Bet you've heard of it—it's the number that, when you're buying a car, getting life insurance, or refinancing your home, decides the interest rate you're slapped with. It's based on the idea that someone who isn't meticulous about certain aspects of life might not be so careful with their health or, say, driving sober. Keeping tabs on your credit score is essential, and there are credit monitoring services that can keep you in the loop with frequent reports. That way, you won't get dinged by some mistake that drags down your score.
To sock away that 20% we talked about earlier, it could be a smart move to set up automatic transfers for your savings. That way, you won't even have the chance—or the temptation—to splash it on something you don't need. In an ideal scenario, the amount you're putting aside should be zapped from your bank account on payday. Just a heads up, though—some accounts might have restrictions on withdrawing the money in a pinch.
As the famous book 'The Richest Man In Babylon' wisely puts it, 'Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.'
Here's a practical takeaway:
Don't invest money earmarked for living expenses or what you've set aside for your 'Wants,' as we discussed earlier. Instead, channel up to 20% aim into savings. If you're new to this, listen to advice from investment specialists. Resist the urge for quick, high returns that often come with higher risks.
To get started you can look for a trustworthy online broker, and pay attention to point 10.
You've probably heard this one before but pause and consider. Align your investment strategy with your 2024 goals and your risk tolerance. There are various ways to invest—spread your bets across different assets like stocks, bonds, and real estate. Each behaves differently under diverse market conditions, industries, and geographies. But, of course, remember, investing always comes with risks. Staying informed and looking after your investments is key.
Looking out for what you've got is way more budget-friendly than splurging on replacements. So, here's a little economic wisdom: keeping up with your car's maintenance or fixing things around the house ASAP is way cheaper than letting them turn into bigger headaches.
And hey, looking after yourself is just as important. Keeping an eye on your health not only guarantees your physical well-being but also works wonders for your financial health. Health issues can often improve with small changes in habits that don't require big money investments. Regular check-ups with doctors and striving for a healthy lifestyle will help you live better and longer without burning a hole in your wallet. It's a win-win.
There's a myth that the financial world isn't for everyone, or that it's too tricky to grasp. The truth? Both claims are false. The more you dive into it, the easier it becomes not only to understand but also to navigate effectively.
The key is to stay updated on changes in regulations, tax laws, stock market developments, and more. It's equally crucial to tweak your investment portfolio accordingly.
Conclusion
To get you started and kick excuses to the curb, here’s a budget template aligned with the 50%, 30%, 20% rule we talked about earlier. Download it and get the ball rolling!
To sum it up, financial freedom isn't about letting your 'finance free'; quite the opposite, it calls for rolling up your sleeves and organizing things a bit. The silver lining? It's 100% doable with some organization, and it'll propel you toward your goals.