The secret to kick-starting your financial freedom
Financial freedom. It means something different to everyone, but the desire to achieve it is universal.
Transitioning to a place of financial flexibility and freedom can seem complex and difficult to accomplish. However, as the saying by philosopher Lao Tzu goes, the journey of a thousand miles begins with just one step. Kick-starting your journey to financial freedom is just as simple.
The first steps of this particular journey are:
In order to reach your destination, you need to know both where you want to go and where you’re starting from.
Begin by assessing your current financial situation. Make note of your income, your outgoings, your savings, your debt, and any investments or pensions that you have. You’ll need a broad overview of where your money is sat and where it currently goes.
Starting on this path is made much easier when you know all the tools at your disposal as well as the current obstacles.
Once you have a clear idea of where your finances are, it is time to set goals. Although the goal of financial freedom is undeniably a worthy one, it’s important to define what that means to you.
Although these goals will look different for everyone, you should try to make sure you define SMART goals. A SMART goal is Specific, Measurable, Achievable, Relevant, and Timely. Create your goals in line with this plan to make them more manageable.
If you have trouble understanding what is achievable, this is an area that a financial adviser could help with.
Make a plan
After you have defined your destination, it’s time to pull out the map and figure out how to get there. Making a plan is the biggest step toward getting yourself financially free. This is the point where your journey goes from daydream to reality.
Since everyone’s financial goals and situations are different, there is no one-size-fits-all outline for what your plan needs to look like. However, here are some of the things that putting a plan together might include:
Setting a budget - Putting aside a specific amount for spending, saving, and bills will create a clear picture of how you can directly impact your goals.
Setting up savings goals - Knowing how much you’ll need to save by a certain date to achieve your goals is key. This can be about both something as big as retirement and as small as taking a trip.
Knowing your pension - Reviewing your pension to know how much you have already saved and updating your contributions in line with your goals, is a great way to begin your long-term saving and planning.
Exploring investments - Investing can seem like quite the beast before getting started, but it can also be an effective way to meet your goals. Spend some time understanding what investment means to you and your financial freedom. It’s also important to understand the risks that can come with investing.
Speaking to a professional - Planning for your future and beginning to invest in it can feel overwhelming. Don’t underestimate the value in seeking help from someone who understands it inside out.
Although making a plan is the biggest step towards financial freedom, holding yourself accountable is the most important. Without accountability, the likelihood that you will reach your goals diminishes greatly.
While some people are able to simply set goals and stick to them, that same innate motivation doesn’t appear for everyone. Here are two alternative ways to stick to your plan:
Have regular check-ins with someone - Whether this is your adviser, your partner, a friend or family member, setting up regular check-ins to discuss your finances and whether or not you’re on track to achieve your goals is an easy way to stay motivated. Much like having a gym buddy, knowing that you have to report to someone can help you stay on the straight and narrow.
Gamify your finances - You can make achieving your goals more fun by turning it into a game. Give yourself points for spending less and saving more. Reward yourself for sticking to your plan. You can even include these rewards in your budget. Making your finances into a fun hobby can keep you from losing interest and therefore motivation.
By taking these simple steps towards financial freedom, you can set yourself up for a more fulfilling and freeing lifestyle and create a better sense of security for the future.