Key Takeaways

Being stuck in a constant cycle of paying bills and not having much money left over can be frustrating. This is why it’s crucial to work towards financial freedom. With basic skills like budgeting, saving, investing, and managing your debt well, you can live your life more fully without having to worry constantly about money.

What is Financial Freedom

Before we talk about how to achieve financial freedom, it’s important to understand what it really means. Financial freedom means being financially prepared for anything that comes your way. It means having manageable debt, money in the bank, and investing wisely for your future so you’re not constantly stressed.

Financial freedom allows you to be in control of your finances instead of living paycheck to paycheck. Once you have enough disposable income and good savings, you have peace of mind knowing that you’ll be able to buy groceries and get your car fixed whenever needed.  

Why it’s Important to Have Financial Freedom

Financial freedom helps you ensure you have enough money on hand to handle all your expenses and spend your time engaging in hobbies rather than spending all your time working to increase your income. Financial freedom allows you to pursue hobbies, take better care of your health, and spend more time with family and friends. This improves your qualify of life. 

Life without financial stress is rewarding and enjoyable. Once your financial worries ease, you’ll be able to focus better on other areas of your life. Financial worries also stress relationships. Financial freedom take away these stressors, allowing you to improve your relationship with your spouse and loved ones. It allows you to ensure long-term financial security so you can enjoy your retirement years. It also helps you build wealth and leave a financial legacy for future generations.  

4 Ways to Achieve Financial Freedom

4 Ways to Achieve Financial Freedom

Achieving financial freedom is neither easy nor quick. It requires dedication, the willingness to make a few sacrifices, and consistency. But the rewards you’ll enjoy make it all worthwhile. Follow the four steps listed below to get started on the right track.

1. Saving Money

If you don’t have a clear idea about how much you’re earning and spending each month, this is a good time to start. You may also wish to get started with a money-saving challenge to kickstart your savings. It’s easy to get bogged down by your busy lifestyle and forget about subscriptions that you no longer use or small expenses that add up over time without you noticing.

Fortunately, there are several easy ways to save money. Here’s how:

  • Use coupons and cashback apps
  • Cancel memberships and subscriptions you no longer use
  • Invest in a coffee maker and make your own coffee
  • Meal plan and carry your own lunch to work
  • Shop around to reduce utility, phone, internet, and insurance costs
  • Purchase generic instead of name brand
  • Reduce discretionary expenses whenever possible

Once you start following these tips, you’ll free up some money each month. Put that money aside either in a savings account for your emergency fund, retirement plan, or independent investment account. Ideally, your goal should be to first allocate all extra money towards your emergency fund until you have at least three months’ worth of living expenses, as most personal finance experts suggest. Next, divert money towards retirement savings to make full use of matching contribution benefits. You can then make contributions to a brokerage account for extra investments.  

2. Managing Debt

If you have student loans, car loans, or credit card debt, make it a priority to get out of debt. As long as you have debt, you’ll be spending hundreds of dollars each month in debt repayment to lenders that you could otherwise save or invest.

It will be difficult to achieve true financial freedom if you’re always wondering whether you should pay off debt or save for retirement. Once you have put aside enough to cover emergencies, it’s time to start tackling debt. Here are a few tips to help you become debt-free:

  • Make a list of all your debts with outstanding amounts, interest rates, and payments each month.
  • Use the debt snowball method by tackling the debt with the smallest balance first before you move on to the next.
  • Alternatively, you can use the debt avalanche method, where you pay off the debt with the highest interest rate first before moving on to the next.
  • Use tax returns, bonuses, or other windfalls to make extra payments toward your debts.
  • Reduce interest charges through debt consolidation. Get a personal loan with a lower interest rate and use that to pay off high-interest debts.
  • Don’t ignore debts because it will only get worse. If you have overwhelming debt and have missed several payments, consider debt settlement or see if you qualify for a debt relief program best suited to your situation.

3. Investing Wisely

As you start paying off your debts, you’ll free up a lot of money each month. Consult a financial advisor to learn more about different options so you can start building an investment portfolio. The earlier you start investing, the more your money will grow due to the magic of compound interest.

Start by taking advantage of retirement accounts available at work, such as your 401k. Aim to invest 15% of your total income in this account. If your current financial situation doesn’t allow that, aim to invest enough to take advantage of employee contribution. 

If you have more money available to invest, consider putting aside money each month in a Roth IRA. Any money you invest in a Roth IRA grows tax-free, so you won’t have to pay any taxes when you withdraw funds in retirement.

Any extra money you have after investing in your 401k and Roth IRA can be invested through an online brokerage account. These accounts make it easy for you to create a portfolio and make contributions automatically. 

Some of these portfolios are managed for you, while others offer you the option to invest in index funds and stocks yourself. It’s important to remember that for most people who do not have a lot of investment knowledge, it’s best to avoid stock picking. Instead, focus on investing in low-cost index funds. Consult a financial planner before you start investing because they’re often your best source of investment knowledge so you can invest wisely. For example, you want to understand the pros and cons of how to use your 401K to pay off debt before committing to this option.

4. Starting a Business or Side Hustle

Another effective way to achieve financial freedom is by starting a business or an additional revenue stream. In many cases, your 9 to 5 may not be enough to achieve your financial goals. Many experts recommend having seven different streams of income, ideally passive income. While you don’t need to try to set them up all at once, you can definitely think of a way to make more money each month. Here are a few ideas to help you get started:

  • If you have good writing skills, become a freelance writer.
  • Monetize your existing skills by creating an account on websites like UpWork and Fiverr.
  • Become a virtual assistant.
  • Consider signing up as an Uber driver.
  • Start a home-based business and sell on Etsy.
  • Become an affiliate marketer.

It’s easier than ever to acquire new skills today, thanks to the wealth of information available online. Use your time wisely to acquire skills that will allow you to increase your earning potential. Once you’re bringing in more income each month, think about how you can invest the extra money so you can start building wealth.

Tools and Resources for Financial Freedom

Other than the tips listed above, there are a variety of tools, resources, and information available online that you can use to learn more about personal finance, investing, and how to achieve financial freedom.

Calculators for Personal Finances

In today’s world, there’s an online calculator available for almost any personal finance-related question you can think of. Many of these can help you simplify the process and save a lot of time. Here are a few calculators worth considering:

  • Use a budget calculator to quickly determine if your income and expenses are what they should be. If you want to quickly look at where you’re spending money and how much, a monthly budget calculator is a valuable tool to have in your arsenal.  
  • Use a savings calculator to determine how much money you should ideally save each month or year to meet your specific goals. A calculator like this will make it easier to see how even a little bit of money each week can quickly add up.
  • A net worth calculator will allow you to determine your current net worth. The calculator does this by adding up all your assets and subtracting your liabilities from the total. Your goal should be to increase your net worth consistently, so this is a helpful tool to use.
  • If your goal is Financial Independence, Retire Early (FIRE), you may also want to use a FIRE calculator. FIRE is a movement that is quickly gaining momentum. It refers to a program that involves extreme savings and wise investments with the aim of retiring earlier than most retirement plans would permit. A FIRE calculator will give you a clear idea of how much you need to save to comfortably fund your early retirement.   

Courses and Workshops 

Personal finance is important in everyday life, but it’s usually not included in school curriculums. Thankfully, there are many resources available online that can help you better understand the basics of personal finance.

You’ll find plenty of free content on YouTube and blogs if you’d like to brush up on the basics or learn better financial habits. If you prefer a structured approach, there are many courses available on websites like Udemy. Industry experts and vetted professionals usually teach these courses, so they’re a good source of reliable information.

You’ll also find local workshops on topics like saving for college, retirement planning, investment strategy, and other money management topics. If you’re considering a paid course or workshop, think about the topics you’ll like to learn more about and pick courses based on that. Ensure the course covers the topics you’re interested in and that it has good reviews.  

Review and Compare

Whether you’re planning to invest in financial services, products, or education, it’s important to check the reviews and compare your options. For example, if you’re in the market for an online brokerage account, you’ll find that there are over a dozen options available in the U.S. Each of them differs in terms of fees, account minimum, and promotions or rewards they offer.

Other than comparing fees and features, it’s also important to thoroughly check the reviews of the product or service to get a better idea of the experience of current clients.

The Bottom Line on Financial Freedom

Saving money, paying off debt, investing, and increasing your income may not solve all of your problems, but they’ll help you get started on the road to financial freedom. Having a plan in place with specific and achievable goals reinforces your motivation to achieve those goals.

As you start making progress, you’ll experience relief from debt and have more money available. Seeing your nest egg grow over the years is also a powerful motivator. Start your financial freedom journey today so you can enjoy a better financial future.