Sound financial management is vital in helping businesses utilize resources efficiently, thereby fueling growth and ensuring long-term financial stability. At the individual level, learning how to manage finances prudently will open the doors to favorable lines of credit, ensure sustainable debt management, and ultimately help you achieve the desired financial freedom.
Financial freedom is a widely used term that connotes having sufficient monetary control to do as you desire without worrying too much about the bank balance. For instance, purchasing a home or going on a dream holiday and still having funds to pursue other life interests. Here are six time-tested strategies for achieving financial freedom:
Take stock of your situation
Begin the journey by assessing your financial situation before kick-starting a snowball effect towards financial freedom. First, take time to analyze your debt situation and the level of savings you need. Then, list all your debts, whether student loans, car loans, or mortgages. All monies borrowed from family members and friends should also be added. Once you are done, add up your savings, including monies from your savings account, retirement plan, and recurring monthly payments such as salary and income from side hassle.
Track your spending habits
Tracking your expenses will help you point out wasteful spending habits and focus on eliminating them. Doing so consistently is vital in maintaining financial control and promoting better financial habits. If you are working on a tight budget and heavily rely on a paycheck, consider scaling down your expenses. The measure should be focused on significant lifestyle changes that will make a serious dent in your finances. Some remarkable options to consider are buying a used car instead of a new one and selling your property.
Pay yourself first
To effectively do so, place a portion of your income on the savings account to pay for recurring bills and other expenses. Employees can also request that a portion of the income be submitted to the retirement savings program to secure a solid financial future. Making an effort to build your savings will motivate you to save more money in the future. The push will also give you peace of mind since you will be better positioned to cover unexpected expenses.
Expand your income sources
If you have an overbearing debt burden, consider boosting your income levels by taking up an additional job or a side hustle. Overdependence on the 9 – 5 jobs means trading crucial hours for money, which could prove costly if you are not making sufficient income to pay off your bills and other essential expenses. If you have limited time but have some capital, consider investing in profitable ventures such as greenhouse farming. Popular side jobs to consider are becoming a freelance writer, a taxi driver, and renting a spare room on Airbnb.
Pay off debt
Depending on the prevailing circumstances, you can decide to clear off your debt all at once or pay it gradually until it is fully cleared. Other popular debt pay-off strategies include debt consolidation and debt management plans. The latter is highly recommended when you have mounds of debts but are making little or no progress to offset the debt.
A debt-financing expert or management agency can help you craft a sustainable debt management plan to reduce the repayment interest rate and pay off the debt. Besides debt settlement, the following strategies will help you keep the debt low: building an emergency fund, stop accumulating debt, cashing life insurance, and increase your income.
Invest in your future
Once your debt situation has reached sustainable levels, your next move is to invest in your future. You can start by putting some money away to cover the rainy days and unplanned emergencies. Since knowledge is power, pursuing a career through continuous education will go a long way to improve your career outlook or job situation. You can realize this in many different ways, including attending investment conferences, in-service training, and pursuing a degree program. The sacrifices you make will increase your chances of getting a promotion and salary increase. Your newfound skills will also be crucial in making a career transition.
Financial freedom means different things to different people. Whereas some people will take it to mean putting away sufficient funds to retire early, many others believe it is setting up a kitty to cover emergencies. The soonest you begin the journey to achieving financial freedom, the earlier results will start to trickle. First, set out the goals you want to achieve and the amount of money you need to realize your dreams. Also, ask what amount of money you can afford to save and invest to achieve the desired freedom. Finally, check your risk tolerance level, which is determined by the level of comfort you can endure in the face of uncertainty.