Habits for Attaining Financial Freedom
Everyone dreams of having true financial freedom, but it can often feel like an unattainable goal. If you are constantly worried about the state of your finances, you could still make strides toward financial freedom. Financial independence doesn’t have to be as far away as you fear.
Financial freedom requires hard work and the formation of healthy spending habits. If you start viewing your financial freedom as something you can work towards in bite size pieces, such as simply focusing on small steps every day, then you will likely be far less afraid of getting started and therefore more likely to succeed.
Try to cultivate these habits in your day to day life to make financial freedom your reality:
1. Set Goals for Yourself
Instead of just trying to get by month to month, set goals for yourself. Goal setting is a way to get yourself motivated to try new things and challenge yourself financially. Short-term goals are better for starting out. It’s easy to slip up or put things off if your goal is to save $500-1000 in the next year, but if you instead set a more attainable goal of saving $50 every month, then you are more likely to follow through, and it feels easier along the way.
2. Stick to a Budget
Always have a budget that you are following. In order for this budget to be long term, you need to make sure that it is flexible. Your budget plan needs to be able to shift with your life. This can be done by planning for your fixed expenses every month, as well as your regularly occurring variable cost expenses, and leaving the rest for things that come up. An emergency fund will take the place of this more volatile method, but that comes later.
3. Pay Off Your Debt Ahead of Schedule
Get into the habit of paying off your debts well before they are due. This will prevent you from falling into debt traps and keep your credit score in pristine shape. This habit can be applied to all different kinds of debt you might have including credit cards, student loans, car title loans, business loans, and medical debt. Pay these off ahead of schedule so that you can mitigate the effects of capitalized interest.
4. Make Your Saving Automatic
A great way to use technology to your advantage to start a financial habit is to turn on automatic savings for your bank account. You can turn on automatic withdrawals from your checking account to send money regularly to your savings account. This way you will be paying yourself first after every payday.
5. Start Investing
If you have the ability, start investing your money now. Take advantage of the gift of time by opening a savings account or 401(k) with high interest. You won’t regret it later when your money has grown exponentially.
6. Look After Your Credit Score
Having a good credit score is necessary to have the freedom to pursue the financial options you want. Start a habit of keeping up with your current credit score at all times. Notice when there are errors or inconsistencies and report them when they pop up. Additionally, educate yourself on the factors that most impact your score, such as credit utilization rate, age and number of accounts, and late payments.
7. Keep Learning
The latest and greatest tips and strategies for optimal personal finance are always changing and shifting with the market and the introduction of new services and technologies. It’s important to never get too stuck in your ways that you don’t keep learning new ways to stay ahead of the curve. Keeping up to date with personal finance techniques can keep you ahead of the game and on top of your finances.
8. Live Below Your Means
Whether you make very little money, or you make a lot, try hard to always live below your means. Never allow your cash balance and assets to fall below your current debt. Sometimes this may be impossible when you are barely making it by paycheck to paycheck, but when you start making more money, continue to live frugally so you always have money left over. This habit will bring you so much more than any material goods could.