Listen and Read: 10 Habits for Financial Freedom
For different people, financial freedom means different things.
When it is somebody as young as a teenager, for instance, financial freedom might mean having their own digs and feeling the wonderful freedom of being cut off from mom and dad.
At the other side of the scale, financial freedom for the retiree might mean days of freedom, never having to ever work again.
To others, financial freedom means having a meal on your plate every night or a roof over your head.
And for others, it’s just doing the things you can when you’ve got a little money!
Financial freedom means different things for different people
No matter what your version of financial freedom is, it is certainly money that makes the world go around.
When you are financially free, you can achieve your goals and live the kind of life you want, go where you want.
But if you are a slave to all your finances, there will be much that is not possible because of money.
If you ask people what they think financial freedom is about, many people straight away think it’s about retirement.
But for others, it is enjoying working to enjoy doing things you know you couldn’t if you didn’t have an income.
For some financial freedom is just not being dependent on anyone else; it is earning your own money and paying your own way!
How do you achieve financial freedom into the future when you retire?
- To put it in a nutshell, financial freedom at retirement means not being all tied up to a job or a location anymore, for financial reasons. It means working at other things you enjoy and maybe at a place where you always dreamed you would end up at in retirement.
- Most people who are coming up for retirement and are secure in their finances look really forward to going over the finish line. But on the other side of the line, there are a huge number of people who have been way off track when it comes to reaching their retirement goals. Some are coming up for retirement in trepidation, not sure that they have financial freedom, realizing that there are pretty much a lot of changes that they will need to make.
- Right now, you might be living pretty comfortably. All your basic needs are covered and you have family and friends, you live in a lovely house in a good area, and you have a good job with a good salary with no debt, ok, maybe just your mortgage payment. On the side, you might even have another business that is doing very well.
Financial freedom doesn’t just happen overnight
First of all, you need to realize that the journey to financial freedom is not something that just happens overnight.
If you do want freedom, it might entail decades of hard work to get to that point.
If you can achieve it, you will be so glad you did and the entire workout would have been worth it.
Don’t let it be money that keeps you a slave to doing all the things you don’t enjoy later on in life, and yet also keeps you from doing all the things you dreamed of when you were younger, and which you long to complete on your bucket list.
How we dream of just splashing out on those new shoes for our holiday, how we dream of just on a whim buying strawberries and ice-cream for a quick snack or buying tickets for that concert that we’ve dreamed about attending.
Imagine never having to work again, to never having to worry about money again.
No more financial stress; now you know exactly what you can spend and you are free to do just what you want within the budget you set yourself, without worrying will there be financial consequences.
Are you in that position?
The levels of financial freedom
Let’s look at each one:
No financial freedom:
If you are at this stage, you are probably relying totally on your paycheck to cover your daily expenses and to sort out the debt you owe.
You might even be finding it difficult to save money at this stage of your life because you actually need every cent you make.
You also know that unless you find ways to make more income, you will probably remain at this stage.
If you want to get out of this situation, you know you will have to work very hard which is going to require a lot of time as well.
Temporary financial freedom:
At this stage, you might have a pool of savings. But in order to keep this pool of savings ‘going’, you need to be making more money than you are spending – and this isn’t only restricted to the raises and the bonuses you get at work.
You might have another job that is bringing in an extra bit of money and this could be what is helping to add to your savings.
When you have more savings, you are more financially free; even being able to switch jobs, doing things you enjoy doing, and even travelling.
But you realize that this type of freedom is only temporary. It is because you are using your salary and extra income to purchase these things and which you know will only last until you are no longer earning a salary, or until your savings are spent.
Permanent financial freedom:
At this stage, you are secure in your financial plan, so that when you retire and are not working, you have enough savings in the bank and your non-employment income is sufficient to carry you through.
In some instances, your savings and non-employment income might even exceed your spending.
It could even be that the side business you had while you were working is now supplying you with income.
What started as your passion back then when you were working and which you found so much fulfilment from is now working for you and you are feeling fulfilled and satisfied.
Where do you stand?
We’ve all got our own different goals in life, different desires and different stances around what financial freedom means to us.
Whatever your dream might be, make this a big dream, making a go for it – and in doing that, make your goals specific and tangible around it.
Without further ado, let’s look at 10 habits that you can start practicing today, to reach financial freedom.
Before we get to them, to begin with, it is important that you define what your financial freedom is because everyone can have their own perspective towards attaining their financial freedom.
You might define yours as being totally debt-free, whilst someone else will say for them financial freedom means a bank balance with a few million dollars in it.
- Get ready to set your goals
All you have to do is to divide your goals up into timetables and then prioritize them.
List them down what you think is your idea of financial freedom, categorizing them either as long-term or short-term goals.
For example, you might have found out that to attain financial freedom in 10 years’ time, you need a million dollars in the bank.
It will mean you have to save a hundred thousand dollars a year. That means you need to earn a certain amount.
With this information in hand, you can set your goal for each year to achieve that financial freedom.
- Is your budget set?
Budget and finances go hand in hand. This means you need to set your budget for each week, month and the whole year.
This will force you to save more, only spending within your limit and paying all your bills on time.
- Have you become debt-free yet?
You probably know that you need to pay your bills on time. You will probably also know that debts consist of two categories:
- Debt with higher interest rates.
- Debt with moderate interest rates.
Those debts which have more than 10% interest rates are dangerous debts and you should prioritize in getting rid of the high-interest ones.
These are things like your credit cards, car loans, payday loans, etc. Pay them off as quickly as you can.
Those are the ones that give financial stress.
- Prioritize your payments
Start saving a percentage of your income at the beginning of each month rather than leaving money to save with the leftover money.
So for example, you immediately deposit 10% of your income on day one of being paid, maybe setting up automatic transfers with your bank.
Then you know it gets done.
- Cut out emotional spending
Spend your money within your limits. Don’t go and buy stuff beyond your budget just so others are impressed.
Remember that money looks better in the bank than on your feet.
- Up your knowledge
It was Warren Buffet who said, “Read 500 pages every day. That’s how knowledge works. It builds up like compound interest.”
Why should you read? It is the ladder to success, particularly if you read the financial news.
You need to keep up to date with all the trends going on in the financial markets, and being informed of all the changing tax laws and understanding the stocks markets so you can invest accordingly.
What did Benjamin Franklin say, “An investment in knowledge pays the best interest.”
- Rather reuse than replace
You probably have some pretty expensive household items in your house – use them responsibly.
Keep them maintained and clean, trying to hold on to them for as long as you can.
Neglecting to look after them can be a pretty costly expenditure; which possibly could have been avoided.
- See your financial advisor
Why? Because meeting with your financial advisor is a good way to get that financial freedom. They will give you good advice, once you have saved enough to invest with them.
Choose a good one though, one who has plenty of years of experience, who is positive and who receives positive feedback as well from his clients.
- Remember that health is wealth
Healthy people are wealthy people, period. People and doctors say that being involved in exercise workouts tends to increase your productivity.
When you are healthy, you don’t take as much sick leave as sick people do, making your more productive at work and needing to pay less insurance – usually heavy obese people need to pay higher insurance.
When you maintain your health properly you are paving the way for yourself to retire at an optimum age with more money saved.
- What about an additional income?
Finding more monetary resources can be pretty tricky. One way to obtain more money flowing is to start your own side hustle.
Think of it as a second job, be it part-time, contract, freelance, even another full-time job.
Do something that you love and are really interested in. Chances are there will be some way of making money out of it.
Can you design and make jewellery, can you write well enough to become a freelance writer for companies, maybe you are tech-savvy and can design and build stuff for others.
Maybe you have kissed your adult kid’s goodbye out the nest and you have a couple of extra bedrooms or two to rent out, or what about becoming an Uber driver?
The sky is your limit, and in fact, the only limit that comes with earning additional income is your imagination.
Financial freedom makes you feel as free as a bird, it takes you places where you would never have gone before, and it opens new doors.
What do financial advisors say?
They say that a frequently asked question clients ask when they come is “Am I financially prepared for retirement?” yet many don’t take the time to ponder if they are emotionally ready to retire.
When you leave the full-time workforce, the real financial implications start.
Too often the economic issues overshadow some important emotional considerations. If you are planning for your ‘golden years’, you need to ensure you have a healthy-sized nest egg.
Before you retire, you need to boost your retirement emotional quotient as well – you need to ease into retirement with peace of mind.
Consider these all-important questions, based on your financial planning, and what you have in your nest egg:
- Where do you plan to live?
If you still have a mortgage or intend buying another house, this is a big financial issue – especially since housing costs are different nationwide. Where are you going to live during retirement?
This needs to be spoken through thoroughly with your spouse before disagreements flare-up.
You certainly don’t want to tarnish your retirement together by being bitter over something as basic as where you intend do live.
- How are you going to spend your free time?
Figuring out what you and your spouse will do with the rest of your life is going to require some intense soul searching and thought.
Some people are afraid to retire, because they associate the term with illness and diminished capacity, just one step closer to the grave.
Some people look at it, and say, ‘now what?’
Rather than taking that approach, rather spend your time examining the breadth of your life – to still accomplish and fulfil unfulfilled dreams and hobbies.
In planning what you want to do, you also need to figure out the things you don’t want to do anymore.
Whilst some people want to lie on the beach and read books all day, others can’t bear the thought – so boring!
You and your partner need to be honest with each other about what you are going to do.
- If you discover or experience your finances falling short of expectations, will you be able to cope with reality?
- Many of us have grandiose ideas of what retirement will be like; we consider the freedom from the stress of work, we think we will travel; we will spend carefree days on the golf course or at the spa. But in reality, a lot of times these dreams and images are more fiction than they are fact.
- The average American is regrettably not prepared for the financial challenges of life. Without a steady paycheck coming in; they might not be prepared to deal with the emotional let-down that often occurs when retirement goals and dreams aren’t realized.
- A big shock for a whole host of people is that they probably won’t even really be retiring at all, certainly not in the manner they hoped. Financial ‘non-freedom’ is forcing a lot more retirees to have to find other work to continue with, and to put up with a far from glamorous, happy, or peaceful retirement. And then there’s the stock market too – it can wreak havoc on retirement funds.
- Unfortunately, many retirees are even falling into debt at the precise time they should be free from the stress of financial worries. In the past, the oldsters used to pay off their mortgages but now, half of the senior citizens still owe on their house. Not only that, the 60-year-olds and over are part of the fastest-growing segment of the U.S. population in debt and many of those over 65 still have huge credit card debt as well. Part of the rising tide of debt is because of the surging housing, surging healthcare costs and energy costs.
Please give careful consideration to the three questions above, to get your debt under control now – better late than never.
You want to ease into the golden years with more personal happiness because you know that while you had the chance, you worked at your financial freedom at the very best you could.
Then at least you will be free from regret.
“A big part of financial freedom is having your heart and mind free from worrying about the what-ifs of life.” Suze Orman