6 steps to gain financial freedom
#1 – Automatically pay yourself first.
Many people are confused by this concept. Of course, you pay yourself first, right? After all, your money is yours to do with as you please. However, they miss the point – at the end of the month, they have nothing left! Pay for your future just like you pay for every other bill.
Many people are confused by this concept. Of course, you pay yourself first, right? After all, your money is yours to do with as you please. However, they miss the point – at the end of the month, they have nothing left! Pay for your future just like you pay for every other bill.
Set up an automatic deduction from your paycheck or your bank account.
#2 – Purchase with purpose.
We all make many spending choices every day. Do you really need that plasma TV now, or could you wait awhile? If you don’t have the cash, don’t spend it. Also, look at the annual effect of your daily decisions (e.g. coffee or lunch out every day).
We all make many spending choices every day. Do you really need that plasma TV now, or could you wait awhile? If you don’t have the cash, don’t spend it. Also, look at the annual effect of your daily decisions (e.g. coffee or lunch out every day).
#3 – Own your own home.
We can make a good case for renting. Research shows that you’re better off “renting and investing” than owning your own home. However, most renters never get to the second half of that phrase.
We can make a good case for renting. Research shows that you’re better off “renting and investing” than owning your own home. However, most renters never get to the second half of that phrase.
That’s one of the reasons why the net worth of homeowners is so much greater than that of renters. Owning your own home forces you to save money. It’s very much related to the first step.
#4 – Pay off debt.
You’ve probably heard people say, “I want to buy a house because renting is just throwing money away.” Why are we so opposed to “throwing money away” to our landlord, but we think nothing of throwing it away to our banker or credit card company?
You’ve probably heard people say, “I want to buy a house because renting is just throwing money away.” Why are we so opposed to “throwing money away” to our landlord, but we think nothing of throwing it away to our banker or credit card company?
After all, the interest they charge is a rental fee on the money you’re using. There’s no difference! So pay off your debt so you stop paying interest.
#5 – Invest wisely.
A lot of people don’t accept enough risk. If you invest too conservatively, it’s hard to reach your goal. There’s a basic financial principle – increased risk deserves increased rewards.
A lot of people don’t accept enough risk. If you invest too conservatively, it’s hard to reach your goal. There’s a basic financial principle – increased risk deserves increased rewards.
But here’s the secret – time takes away much of the risk. If you’re investing money that you don’t need for five years your risk is generally less than if you need it in one year.
Don’t put all your eggs in one basket. The easiest way to do this is to invest in a no-load mutual fund balanced for people in your age bracket. Don’t touch this money until you’ve reached your goal.
#6 – Prepare for the unexpected.
Here’s what you can expect – you will face some obstacles on the way to your financial freedom. Prepare for them. Make sure you’re insured properly, including disability insurance.
Here’s what you can expect – you will face some obstacles on the way to your financial freedom. Prepare for them. Make sure you’re insured properly, including disability insurance.
Stash away an emergency cash reserve. Most experts recommend that you have three to six months of living expenses in an account for unexpected events. If you have equity in your own home, you may be able to establish a home equity line-of-credit to cover these emergencies. Then you can invest the money you have kept in reserve.
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