Attaining Financial Freedom means getting / having enough money / investments so that you could afford to retire and pursue your life dreams without worrying about how much money you should earn every year to get by in life.
Most of us never end up attaining this financial freedom as we have debts, emergencies, spending and unforeseen circumstances that shows up just in time to eat in all our income.
However, you could follow these :
6 habits to get in the path of attaining financial freedom
1) Be smart with your Career
For most people, their bi-weekly paycheck from their current job is the primary source of income. And they cling to this job as long as possible. No matter how miserable they feel, they get scared to leave the job and find a position somewhere else.
They never get mentally ready to try new job as they aren’t ready to face the unknown of the new job.
Think about it, It takes you 2 months to get used to a new job. Just 2 months. If you are miserable at your current job or if your paycheck is small compared to what you could make at a new job; why don’t you start looking for a new job?
Why not move to a new position that offers better growth (both professional and personal) as your experience grows?
2) Learn to Manage Money
You will end up with a financial disaster if you don’t know how to manage your money. Make plans on what to spend and what NOT to spend on every month. Make budget plans with your spouse or an accountability partner for the month. Don’t overspend where you don’t have to.
3) Pay off Loans in Full
People get in different loans for different reasons. Whatever reason it was that you went in loan for (car loans, credit card loans and student loans); try to pay off these loans as early as possible so that you could start building the wealth.
Paying off debt should be the primary target because these debts eat up a big chunk of your paycheck. Once you are debt free of these loans, you can then start accumulating wealth.
P.S. we knowingly didn’t include mortgage payment above as mortgage payment is a long term commitment and you might not be able to pay it off in a year or two. If possible, try to refinance your mortgage so that you could pay off the loan in 15 years instead of 30 years.
How would you do it? Budgeting of course. As mentioned in step 2; don’t overspend on things that you don’t have to. Use that “otherwise spent money” to pay your mortgage instead.
4) Create Automatic Savings
When your paycheck comes; pay yourself first. Enroll in your company’s 401k plan and ensure to make use of employer’s contribution benefit. Also, you can deduct automatic amounts from your bank account every month to invest in stocks/mutual funds. The magic of compound interest lets the money grow exponentially over time.
5) Maintain your Credit Score
It works on your favor to have a good credit score. What does that mean? That means you are paying off your debts and liabilities in a timely manner and you know how to manage your budget. A healthy credit score helps to get the car loan or a mortgage refinance in a lower rate. This helps to save money on the long run.
6) Live below what you could afford
Being frugal is not necessarily a lifestyle but rather a mindset.
Let’s say you could afford to get a loan to buy 60k Mercedes car or you could cash out to buy a $5k car. Unless you are trying to impress the society (mostly these are the people you don’t know and you don’t care about; neither they care about you); you should really do a reality check and say –‘Is this car a necessity for me? Or is it a show off luxury’.
Always ask this question when you tend to buy a stuff so that you have a reality check. Is this the stuff that you may want? Or Is this the stuff that you need for your life?