The keys to financial freedom aren’t just for the wealthy. In fact, isn’t a big secret reserved for just a select few.
What if you realized that it is within reach, and all you had to do is to change a few financial habits? Anyone can achieve financial freedom with just a few simple tips.
Here’s what you need to do.
What is financial freedom?
Financial freedom means you aren’t living paycheck-to-paycheck. You have enough money to cover not only your bills but also to meet your financial goals. You don’t wonder where your money will come from to cover your bills or how you’ll pay for that sudden car repair. You have enough money set aside in the right accounts to make sure you can afford anything life throws at you.
What does financial freedom look like?
The keys to financial freedom look different for everyone. Still, generally speaking, it means you don’t have unnecessary debt (credit cards, personal loans, etc.), and any debt you do have, like a mortgage or car payment, you have more than enough money to pay for each month.
It also looks like having a carefully crafted budget that leaves plenty of room to save for your life’s goals, including an emergency fund, sinking fund, retirement savings, and savings for any other important goals.
Why financial freedom is important
Financial freedom gives you peace of mind. Wouldn’t you sleep better at night knowing you can comfortably afford your bills and everything your family needs? You could rest easy knowing that you’re saving for the future and not just the demands of today. You’ll take your focus off immediate survival and instead focus on how you can empower your life moving forward.
Benefits of financial freedom
Everyone experiences something different with financial freedom. Before we clue you in on the keys to financial freedom, here are some of the top benefits to consider.
1. You can do what you want
When you aren’t financially free, you focus on what you have to do, like work to make ends meet. When you’ve achieved financial freedom, you have more choice to do what you want rather than what you have to do. It can change your entire mindset and make you feel better about life in general.
2. Money won’t stress your relationships
If there’s one thing most married couples fight about, it’s money. You don’t have to fight about money when you’ve achieved financial freedom. You’ve created the path you wanted to have enough money for now and the future. There’s no reason to fight, and if you’ve achieved financial success, chances are you and your spouse are on the same money page too.
3. You’ll live the goals you set
We all have what feels like lofty goals in life, but when you take the steps to financial freedom, those goals can be a reality, no matter how crazy they seemed at the time. Once you get there, you can look at yourself in the mirror and say, ‘I did it!’
4. You’ll have less stress and better health
You’ve heard the phrase ‘money is the root of all evil,’ right? While that’s not necessarily true, it can cause you unnecessary stress, harming your health. When you have less stress, you’ll eat better and exercise more because you feel great and have the energy to do so. When you take better care of yourself, you’re less likely to suffer from significant health conditions such as heart attack, stroke, or diabetes.
5. You’ll be more confident
Money can make or break how you carry yourself. When you don’t have enough money, you feel less than, and your body language shows it. You’ll feel less sure of yourself and not have enough confidence in the decisions you make.
When you are financially stable, you are confident in your decisions and are more capable of telling others what you need or what you think without worrying about what they think of you.
How to achieve financial freedom
If achieving financial freedom sounds just like what you want, here are the 15 keys to financial freedom that you must take to reach this status.
1. Set life goals
You can’t reach goals if you don’t set them! Sit down and think about what you want for your life today, in 5 years, and in 10 years or more. Write the goals down and get detailed with them. Don’t just say, ‘I want to be financially stable.’ Make the goals measurable and realistic.
If you can’t see your progress, they aren’t the right goals. You need to be able to measure where you are at, what you need to do to reach your goals, and what you should change to finally achieve what you’ve set out to reach.
Think of a budget like a map for your money. It tells you where your money must go each month. Instead of guessing or just spending because you have the money, create a detailed budget that includes line items for saving for things like emergencies, rainy day funds, and your goals.
Your budget doesn’t have to be fancy, and there’s no right or wrong way to do it as long as your income is higher than your expenses.
3. Boost your income
Don’t rely on one income stream. Did you know millionaires have an average of 7 income streams? If one income stream fails, they have others to back them up.
You may not have seven income streams, but more than one is essential. Create passive income streams, like dividend-paying stocks or high-yield savings accounts, as well as active income streams, such as your main job, side gigs, or real estate investments.
4. Pay yourself first
Most of us spend all month and then think about saving when it’s all said and done. At that point, it’s often too late. Instead, change your outlook and pay yourself first. Make saving for your goals a line item on your budget and set up automatic transfers to those accounts on your paydays.
5. Build an emergency fund
No one can be financially stable without an emergency fund. Try to save three to six months of expenses in this account. It should only be used if you fall ill, lose your job, or can’t work for some other reason.
Put your emergency fund in a separate bank, so it’s not easy to access. Use the out of sight, out of mind mentality and forget that it’s there unless you have an emergency.
6. Pay credit cards off
Unless you have a 0% APR credit card, you’ll never earn more than the interest you pay on your credit cards. Don’t waste your money investing and keeping credit card debt. Pay your debt off as fast as you can so that you can invest aggressively and reach your financial goals, but focus on paying the debt first.
7. Create automatic savings
Work smarter, not harder, when it comes to saving money. Set up automatic savings either with your employer and direct deposit or with your bank. Most bank accounts can set up automatic transfers to either a savings account at the same bank or an external account. This makes saving easy and takes the thinking out of it.
8. Take advantage of compound interest
Every dollar you save today will be worth more tomorrow. Even if you only make less than 1% interest on the money you set aside, the interest will compound. Not only will that $1 grow, but so will the pennies you earn in interest. It may not seem like much now, but the money will keep growing, and when we’re talking about more than a couple of dollars, you can see some serious growth with compound interest.
9. Start investing
Investing isn’t just for the rich and famous. Everyone can do it no matter how much money you have right now. Whether you invest your spare change using an app like Acorns, or you invest aggressively in a 401K or taxable investment account, you’ll give your money an even greater chance of growing at immense speeds.
10. Diversify your investments
Don’t put all your eggs in one basket when you’re learning how to achieve financial freedom. Diversify your investments by investing in stocks, bonds, real estate, and commodities. Even when you invest in stocks, make sure your money is spread out in different industries so that if one industry crashes, you have money in another industry that may perform better and make up for the loss.
11. Watch your credit
Don’t use your credit carelessly. In other words, don’t take on unnecessary debt. A mortgage or car loan might be necessary, but credit cards aren’t. Don’t take on more than you can afford, and don’t use credit cards as an extension of your income. Only buy what you can afford to pay off in full and always check your credit reports to make sure all information reported is accurate.
12. Invest in maintenance
Take care of the things you own, like your house and car. They’ll be worth more when you maintain them, and you’ll have fewer emergency expenses too. Get help from professionals to learn what preventative maintenance you should do each year to ensure that your house and car are an asset and not a liability that sucks the life out of your budget.
13. Live below your means
Have you ever noticed the filthy rich don’t drive fancy cars, or if they do, they aren’t the latest model, and they may even be several years old? They also don’t dress like they are walking advertisements for name brands.
Buy what you need and have some fun, but don’t go overboard. You should have plenty of disposable income so you can achieve financial freedom.
14. Get a financial advisor
You don’t have to be rich to use a financial advisor, but you might get rich using one. A financial advisor will help you learn how to achieve financial freedom by looking at your spending patterns, making suggestions, and helping you learn how to invest for growth.
15. Take care of your health
If you take care of your health, you’re less likely to have medical emergencies, which means you’ll spend less money on medical bills. Learn to eat right, exercise enough, and see the doctor every year for checkups so you can stay on top of your health and catch any issues early on.
How long does it take to reach financial freedom?
Everyone achieves financial freedom at a different pace. You can pick up the pace by living below your means, avoiding debt, and saving or investing aggressively. The earlier you start, the easier it is to achieve financial freedom because your money has more time to grow.
What is the key to financial success?
The keys to financial freedom can be in your hand. You don’t need special talents, a ton of money, or to know anything other than what everyone else knows.
Live below your means, learn to save, take chances and invest, diversify your income, and be smart with your money. Don’t focus on what you can have today but what you can build for the future, and you’ll have the key to your future in your hands.