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3 steps to financial freedom

Photo by Tracy O

Are you enjoying financial freedom?

If you want to enjoy life, one of the things you should aspire for is gaining financial freedom.

Financial freedom means you can do most everything you want without having to worry about earning money to pay the bills.

Imagine what kind of life you’d have if you were completely secure about your finances. I’m sure you could think of a lot of other things you’d want to do if you were financially free.

There are three steps you can take to be free of your money worries. They sound simple but you need to be in total control of yourself to make them work.

1. Control your expenses

Remember how we are told to spend less than we earn? No matter what day and age, this step will always be an effective way to be financially free. When you control your expenses:

• you can make sure that you’ll have enough money for everything you need like basic necessities and bills
• you can spare cash for the things that you want like the occasional shopping spree or spa treat
• you’ll avoid living from paycheck to paycheck and the edgy jittery feeling that comes with it

How do you control your expenses?

• Make a list of all your basic expenses like food, water, electricity, rent, phone bills and other needs.
• Allot a budget for each basic expense and add it up to come up with a monthly budget.
• Subtract your monthly budget from your monthly salary so you’ll have an idea of how much you’ll have left. (And no, the money left is not for shopping, its going to be used for Step 2 and 3.)
• Stick to your monthly budget for each expense and regularly review them to see if you can cut some costs here and there.

One of the ways you can effectively keep track of your expenses is to keep an expense list for the day.

You will be surprised at how much money you’re spending for the “little things” like snacks and little trinkets once you see how they add up at the end of the week. Plus, keeping a list will help you be more conscious about how you’re spending too.

Remember the money left from your salary? Use it to do either of the two:

2. Get out of debt (or stay out of debt).

Debt is probably one of the biggest problems many people face today. This stems from failing to do step 1 and having a knack for “get it now, pay later” instant gratification. If you have a lot of credit cards, it surely is tempting to max all of it for luxury expenses thinking you can pay it all later anyway. But if you’ re not careful, you might just find yourself buried a foot deep in debt.

If you’re the impulsive buyer type, stay away from the credit card. Better yet, pay for all your purchases in cash so you can stay out of debt.

If you really have to use your card to buy something you absolutely need, make sure you pay it off first before making another purchase.

What if you already have debt?

Get help!

There are services that offer debt relief by helping you to manage your debts and to come up with a workable plan to pay for them. For example, Bills.com offers a debt consolidation service so that you can consolidate debt from all your credit cards to just one debt so that you only have to make one payment. Visit their website to learn more about their services and for other helpful financial advice.

3. Save and invest.

Getting a good old savings account is a great way to save money.

But if you really want to make significant savings, you have to save smarter. Look out for ways to save your money and get high returns from it like insurance plans and wealth builder plans. It’s your hard-earned money so you deserve a bank or insurance company who will work just as hard to make it grow.

Remember to set up a buffer fund too. This buffer fund would help you cope with sudden financial setbacks just in case you lose your job or you get sick. Ideally, a buffer fund should be equal to three months worth of your salary so that you’ll have enough time to bounce back.

If you’ve got these down pat, next step would be to invest your money for even higher returns. I know investing sounds like a whole new language but if you take the time to get over the learning curve, you may just get your efforts repaid a thousand fold.

After reading these, I’m pretty sure you’re thinking achieving financial freedom takes a lot of hard work.

Well, if you’re used to carefree spending, it probably does.

But if you take these “seemingly hard” steps now, you’re well on your way to getting easy money for a future that’s financially free.

What financial strategies have worked well for you? Share them in the comments section below.

Posted in: Miscellany

This entry was posted on Tuesday, September 9th, 2008 at 12:55 am and is filed under Miscellany. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.