It would be nice to live a worry-free life wherein you don’t have to fret over money for food, utilities, and other bills. Achieving true financial freedom is everyone’s wish because that means you have enough money saved and invested to afford the lifestyle you want for yourself and your loved ones. This status equates to having enough passive income to pursue an early retirement so you can live your best life.
Unfortunately, for many people, this remains a pipe dream because of debt, conspicuous consumption, and emergencies. If you genuinely want to be financially free, then you must be willing to work hard to grow your nest egg to transform your dreams into a reality. This is not an overnight process unless you win the lottery. Since that is far-fetched, nothing can compensate for hard work and following a plan. It would help if you inculcated the following habits to make this dream come to fruition.
Set Clear Objectives
Set clear and specific goals so you will always stay on track and keep motivated. List down your finance objectives from money saved in the bank to prospective properties you foresee yourself investing in. Make a very thorough input of what kind of lifestyle you want at a certain age. Being detail-oriented means, you have a higher chance of achieving those financial goals.
Craft a Budget
If you want to keep your spending in check, make a budget. This entails knowing how much you are earning from your job and passive income investments. This will allow you to break down your money so you can save, invest, and spend responsibly. Your budget must align with your goals if you want to achieve them. As a general rule, live below your means and resist buying stuff you do not need.
Know Your Loans
Loans are not created equal because they vary in terms of interest rates and loan terms. Credit cards have very high-interest rates. Unlike student loans and your mortgage, which can be put off because of low rates, credit cards have to be paid in full each month. Don’t lose money to those killer rates. It is still important to keep credit cards around to avail of promo offers and earn rebate points. You also need them to improve your credit history, but you must know how to manage them.
Pay Yourself First
True financial freedom starts with paying yourself first. If you are employed, take advantage of your employer’s retirement plan so you can optimize that matching contribution benefit. On top of that, create an automatic savings plan from your paycheck so that you can be prepared for any emergencies. Make it a rule never to touch this account for frivolous wants.
Leaving your money in the bank is a bad idea because inflation will kill its value. Take advantage of compound interest by availing of preferred shares, which will increase your income dramatically over time. You must also diversify your portfolio with cash deposits, treasury bills, corporate bonds, insurance policies, and the like. If you have enough funds, you can also invest in real estate. Follow the rule never to put all your eggs in one basket.
Be Mindful of Your Credit Rating
Make sure you prioritize your credit score as this is the determinant of your interest rate when you avail of home refinancing, car loans, commercial loans, etc. It can even influence your insurance premiums. Staying on top of this means you are not reckless with your finances.
If you really want to be financially free, you must be vigilant about your income, investments, savings, and expenses. It would be best if you also made it a point to educate yourself by keeping up with financial news. Knowledge is power! This is your best defense in toughening up your financial portfolio so you can always make sound and informed decisions that are based on facts and not conjectures.