Many people overlook that physical, mental, and financial health are interwoven. What affects one tends to spill over into the other two areas. And the essence of financial health lies in freedom and independence. It is that peace of mind you have knowing that you are able to rely on your own resources sustainably and in the long-term. You cannot achieve this overnight—the change stems from planning, effort, and perseverance. So, do you have a feeling your financial actions and decisions are leading you in the right direction or not? Do not fret if the answer is no. Here are some basics steps to move towards financial freedom.
Establish your goals
It all starts with a shift of mindset. You need to stop the autopilot mode, take control of your finances, and embrace responsibility for your actions. Kick off the journey by setting clear and realistic goals to serve as your roadmap. Put them in writing and attach a timeframe. Bear in mind that you need to figure out short-term, mid-term, and chief, long-term aspirations. One pressing objective, for instance, could be to deal with credit card debt or to pay off a mortgage. This makes so much sense because it would mitigate the negative effect on the budget and increase your ability to plan and enhance your finances down the road.
Gauge your financial health
Furthermore, assess your financial health and look beyond where you are today. Namely, it pays off to set your eyes on the future horizon. Calculate your net worth, which is the amount by which your assets exceed your liabilities (what you own minus what you owe). Track any changes on a regular basis. You can also take an age pension income test, see how your earnings might fluctuate, and work out a ten-year career outline. All in all, determine how your budget holds up and how your financial situation is going to change. Consult a financial advisor if you struggle to grasp the big picture.
Management and budgeting
Next, it is time to improve your money management skills. The basic rule is to live slightly under your means — spend less than you earn. To pull it off, develop a deeper understanding of your spending patterns. Trim expenses in areas like transportation and entertainment. Use a bike to go to work instead of a car. Cancel magazine subscriptions and take advantage of free entertainment options. Note that you can use smartphone apps to record your spending and scan receipts. After making these changes, you should set a new, sound budget. This is the foundation of any effective financial planning.
Saving for a rainy day
Set the surplus aside and allocate it to savings or an emergency fund. At the very least, you should go for 10% of your income and try to steadily increase the amount. Accidents and disasters do happen and sometimes they cannot be avoided at all. Therefore, you want to be well-prepared. An emergency fund can help you overcome the tough period after losing a job or failing to recoup an investment. It enables you to remain in the driver’s seat even when everything is working against you. Just remember that saving takes practice: it is a habit that slowly develops and grows on you.
Once your savings pile up, you will be able to use them as an investment fund as well. To move forward with confidence, determine what your risk appetite is and what skills and competencies you possess. For example, if you do not mind the extreme volatility and unpredictability, then the cryptocurrency market could bring you immense returns. In case you want to play it safe, you can go for a more traditional approach and invest in stocks. It is always a good idea to put money in a niche you love and know backward and forward. Great investment decisions will help you not only gain freedom, but enjoy financial prosperity and abundance.
In control and balance
The journey ahead is long and the road often twisted. To navigate it, evaluate your financial health and track how it changes over time. Use a reality check to see where you are today and identify where you want to be years from now. Adopt good daily habits and keep spending in check. Be prepared to adjust your lifestyle and face the music. Once you gain solid financial footing, you can consider ways of improving your net worth and building an investment portfolio. Whatever you do, forge your path and be able to make your own choices. Ensure a bright financial future for yourself and your loved ones.