10 steps to financial freedom
THOUGH it may seem extremely bleak right now, it is not too late to take control of your finances and stop living paycheque to paycheque. It’s time to put a plan in place to be able to live more comfortably by attaining what is called financial freedom.
Financial advisor Colleen Ellis shared with All Woman that, “Simply put, financial freedom is about taking control of your finances in a way that allows you to live the life you truly want. It does not mean you won’t need a job, but it means you won’t ever be worried about taking care of your monthly bills or any emergency expenses.”
Ellis recommends this 10-step formula to achieving financial freedom:
1. Understand where you are
In order to achieve financial freedom, you must be aware of your starting point. Be honest with yourself and decipher how much savings you have, how much debt you have, and how much money you will need.
2. Look at money positively
Your point of view about money is very important. You should not see money as scarce, as the root of all evil, or be daunted by the idea that it takes a lot of money to make money. Instead, look at money from a place of abundance. Money is a good thing and should be viewed in such light.
3. Write down your goals
This is very cliché but it definitely works. When you write down your goals they become more vivid, and you are able to see the difference it will make in your life.
4. Track your spending
Determine a weekly, fortnightly or monthly budget and stick to it. This cannot be emphasised enough. This ensures that you don’t spend more money than you have, that you make better financial decisions, prepare for emergencies, and keep aligned to your long-term financial goals.
5. Pay yourself first
George Clason mentioned in his book The Richest Man in Babylon that, “Any man who will put one tenth of his earnings consistently and invest it wisely will surely create a valuable estate that will provide an income for him in the future and further guarantee safety for his family.” When you pay yourself first, you put yourself and your future first.
6. Spend less
This does not mean not spending at all, but instead it means being frugal and able to distinguish between wants and needs. By spending less you will learn that you need a lot less stuff to survive, which helps you to save more towards your goals and financial freedom.
7. Buy experiences, not things
It’s perceived by many that the things that will help you live a more fulfilled/happy life will be the experiences you have and not the product. Don’t spend money you don’t have in order to pretend you have money. Invest in memories that make you feel guilt free (you didn’t get into debt to do it).
8. Pay off debt
Even though we do not want to, many of us may have to borrow at some point in our lives (for car loans, mortgage, business loans, etc). What’s important is that you stick to paying off any debts on time, and if possible, pay more than your monthly installments, which will lessen the time for repayment. That way you can save more and get closer to financial freedom.
9. Create additional sources of income
It’s important to have regular streams of income other than your main job/employer (passive income). Additional streams of passive income can be created through an online business, YouTube channel or blog, investing in stocks, bonds, mutual funds, and other financial securities. Remember, “gold in thy purse is gratifying to own and satisfieth a miserly soul, but earns nothing”. You have to put your money to work for you.
10. Invest in your future
It’s highly impossible to achieve financial freedom without making plans for the future. It’s important to set aside money for rainy days (an emergency fund), retirement and the one thing we are most certain of — death. Make sure you have enough life insurance to replace your income for loved ones who are dependent on you once you are no longer around.
For more information you can contact Colleen Ellis at colleen_ellis@sagicor.com.
