Financial freedom helps you to take ownership of your finances and more importantly, your life. It is all about living with your means and making sure you have a dependable cash flow that allows you to live the life you want without worrying whether you will pay your bills or any sudden expenses.
Financial Freedom can broadly be defined as having enough financial resources to afford the kind of life we desire for ourselves and our loved ones, with feelings of peace, and no stress with regards to money. The tools and resources available to everyone in every context can vary a lot. This is why it looks different for almost everyone.
1. Understand where you are at
It is important that when you first set out on this journey toward financial freedom to look at your starting point. See how much debt you have, how much you have saved, how much you could have saved, and how much money you need. It can be very difficult to sit down and face these figures but it is a valuable step in the right direction.
Debts
It is important to compile a list of your debts, like your; home loans, personal, car loans, credit card debt, student loans, and other debts that you might have accumulated. Be sure to include any money that has been borrowed from family and friends over the years. At this point it can look very daunting but as we go along we will show you ways to lower this number and increase your savings
Savings
It is also important to see how much you have saved so far. Take a look at your saving accounts, stocks, CPF accounts, and any other retirement plans. Also include your monthly payments such as your salary, side hustle, and etc.
2. Setting Life Goals
Typically people have vague goals but to have a mindset shift it is important to get specific. Create a spreadsheet on how much you would like saved in your bank account and how much the lifestyle you want would entail and also what age that you would like to achieve it by. The more specific you get about your goals the more likely you are at achieving them.
Writing down your goals
It is important to write down your goals, whether it is to travel or to pay for your first home or to get out of student loans. It is exciting to see your debt amount dwindle and your savings ride, it helps to see the changes in your finances.
3. Creating a Monthly Budget
Creating a monthly budget is very important it is good to create subgroups for each section as you list them out, for example having groups like; transport, food, housing, savings, entertainment, monthly payments, loans, miscellaneous (such as outings, presents, hobbies, personal items, etc.), and yearly payments (calculate how much you need to save monthly).
Track your Spending
After creating a budget it is important to keep to your budget, to just spend 5 minutes a day to key in what you have spent that day and make sure you are able to keep within your monthly budget.
4. Earn, Protect, Accumulate
It is important that the money you earn should be safe and accumulate with time. People tend to keep it in a bank which does protect your money but it doesn’t grow much staying in the bank. This is why we suggest investing. Before investing in any company it is important to do your research on the company and also to understand that investing is not a get rich quick scheme but it takes time.
5. Create an Automatic Savings Plan
Making an automatic deposit into a savings account is the perfect way to ensure you don’t spend any extra cash. Once this becomes a habit, it’s possible that someone might find themselves glad they saved so much by making these regular investments!
Pay yourself first
Paying yourself first is a great way to establish sound financial habits. It creates the mental association between paying your future self and ensuring that you have money in reserve for when life throws its curveballs, so it’s important! Most people prioritise their spending like this: bills-fun-saving, when doing this often there is little left over to put in the bank which is why you should prioritise saving-bill-fun instead, setting aside the money before you spend.
6. Pay Off Credit Cards in Full
It is important to pay off high-interest consumer loans such as credit cards each month in order to build wealth. Student and mortgage debt typically have much lower rates, so paying them off is not an emergency.
7. Spend and splurge within your budget
Just because you are on a budget doesn’t mean you can’t go out and eat or have fun with friends. What is important is to do it within your budget. Allocate a sum that you can use monthly to spend and splurge on yourself, whatever is leftover at the end of the month you can either save or you can carry forward to maybe splurge on something even better.
8. Keep a Healthy Lifestyle
When you want to live a financial freedom lifestyle you need to live a healthy lifestyle so that you won’t need to go to the doctors so often and can get better health insurance as premiums can become higher with ailments and obesity.
9. Living Frugal
Living frugally doesn’t mean being stingy with your money it means being conscious of your spending habits and focusing on a few financial priorities. Be intentional with your spending. A great example of living frugally is Warren Buffett, he purchased his 5 bedroom home in 1958 for 31.5K and hasn’t moved even though he is worth 90.3 billion.
10. Get a Financial Consultant you can trust
It is important to have a good financial consultant you can trust. They will help to educate you and help you make decisions with the wealth that you have amassed.
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