Queen Nwabueze
No, we are not about to go into some academic definition of the term, ‘financial freedom.’ Everyone knows what it is.
Simply, financial freedom describes having enough savings, investments, and cash on hand to afford the lifestyle you want for yourself and your family. Interestingly, financial freedom is an important goal for many people. It also means growing a nest egg that will allow you to retire or pursue any career you want—without being driven by the need to earn a certain amount each year.
Join our WhatsApp ChannelLet’s even dig it. What does financial freedom mean to you? Truly, everyone has a general desire for it, but that’s too vague a goal. You need to get specific about amounts and deadlines. The more specific your goals, the higher the likelihood of achieving them, remember?
To kick off, kindly write down these three objectives: 1) what your lifestyle requires; 2) how much you should have in your bank account to make that possible; and 3) what age is the deadline to save that amount.
Next, count backward from your deadline age to your current age and establish financial mileposts at regular intervals between the two dates. Write all amounts and deadlines down carefully and put the goal sheet at the front of your financial binder.
Now, integrate these 5 habits and set yourself on a path of financial stability:
- Make a Monthly Budget: Making a monthly household budget—and sticking to it—is the best way to guarantee that all bills are paid and savings are on track. It’s also a regular routine that reinforces your goals and bolsters resolve against the temptation to splurge.
- Create Automatic Savings: Pay yourself first. Enroll in your employer’s retirement plan and make full use of any matching contribution benefit, which is essentially free money. It’s also wise to have an automatic withdrawal into an emergency fund, which can be tapped for unexpected expenses, as well as an automatic contribution to a brokerage account or something similar. Ideally, the money for the emergency fund and the retirement fund should be pulled out of your account the same day you receive your paycheck, so it never even touches your hands. Keep in mind that the recommended amount to save in an emergency fund depends on your individual circumstances. Also, tax-advantaged retirement accounts come with rules that make it difficult to get your hands on your cash should you suddenly need it, so that account should not be your only emergency fund.
- Negotiate for Goods and Services: Many people are hesitant to negotiate for goods and services, because they’re afraid that it makes them seem cheap. Conquer this fear and you could save thousands each year. Small businesses, in particular, tend to be open to negotiation, so buying in bulk or positioning yourself as a repeat customer can open the door to good discounts.
- Live Below Your Means: Mastering a frugal lifestyle means developing a mindset focused on living a good life with less—and it’s easier than you think. In fact, before rising to affluence, many wealthy individuals developed the habit of living below their means. This isn’t a challenge to adopt a minimalist lifestyle. It simply means learning to distinguish between the things you need and the things you want—and then making small adjustments that drive big gains for your financial health.
- Get a Financial Advisor: Once you’ve gotten to a point where you’ve amassed a decent amount of wealth—either liquid assets (cash or anything easily converted to cash) or fixed assets (property or anything not easily converted to cash)—get a financial advisor to help you stay on the right path.
Bonus:
What Is the 50/30/20 Budget Rule?
The 50/30/20 budget rule, popularized by Senator Elizabeth Warren, is a guideline to achieve financial stability by dividing after-tax income into 3 categories of spending: 50% for needs, 30% for wants, and 20% for savings and paying down debt. We have built an easy-to-follow budgeting calculator to help you categorize and control your spending and saving—which is the essential first step toward financial freedom.
