Steps to Financial Freedom
In this article I will share 5 simple steps to financial freedom. By following these simple steps you will be able to achieve financial freedom for you and your family! And you’ll get there before you know it!
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5 Simple Steps to Financial Freedom
If you are looking for simple steps to reach financial freedom, then this article is for you! There are many things you can do to help you achieve financial freedom, but these are 5 of the most important steps to help you reach financial independence for you and your family. Follow these simple steps to start working toward your financial freedom today!
1. Build a six-month emergency fund.
As a first crucial step for financial freedom, save up a six-month emergency fund.
To achieve true financial freedom, you have to be able to take care of life’s financial setbacks. And those setbacks do happen. Cars break, roofs leak, windows get broken, kids break bones, car accidents happen, people get laid off from work or become permanently disabled—no one is immune from financial problems. And in order to reach and maintain financial independence, you need to be able to take care of those financial challenges when they arise.
That is where a six-month emergency fund comes in. By having at least six months’ worth of expenses in an emergency fund you can pay for these financial challenges as they come up.
While you are working toward financial freedom, if you have a stable job (and especially if you have two stable jobs) and you have newer cars and a newer home and no major health conditions, you might decide to get by with a three-month emergency fund. But as you get closer to complete financial freedom, you should plan to have a six-month emergency fund.
Learn about how to create an emergency fund here.
2. Get out of all consumer and other nonmortgage debt.
Once you have an adequate emergency fund, begin to aggressively pay off all nonmortgage debt. That includes credit cards, student loans, medical debt, installment loans on furniture and appliances, auto loans, personal loans, and all other debt so that you can cover any large financial setbacks that might come your way.
One very effective modification to this step is to build just a starter emergency fund of $1,000 (or up to one month’s worth of expenses, if you want to save a little more) until you have paid off all of your nonmortgage debt. Then you would work to pay off all of your debt as quickly as possible.
With a starter emergency fund in place, if you have financial trouble while you are working on getting out of debt, even though you won’t have a full emergency fund, you will have enough that in the vast majority of situations you won’t have to go deeper into debt to take care of it.
The sooner you can get out of debt, the better! When you are debt free, as Dave Ramsey teaches, you get control of your most powerful wealth-building tool—your income!
Read this article to learn how to get and stay out of debt.
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3. Invest regularly to fund your (amazing!) retirement.
As a next step to your financial freedom, once you are out of nonmortgage debt, start to invest systematically for retirement.
If you work for a company that offers a retirement plan (such as a Roth or traditional 401(k) or 403(b)) where they match your contributions, start there, and invest up to the match. If you don’t have a match available to you, and once you have met the match, then open a Roth IRA and start funding it.
If you can, save 15 percent of your income between your company retirement fund and your Roth IRA so that you can build a nice, comfortable retirement for yourself.
Once your income is high enough or if you aren’t able to contribute to a company retirement plan, max out your Roth IRA ($6,000 per year, or $500 per month).
Read this article to learn more about investing for retirement, such as what to invest in and how much to invest in various types of mutual fund accounts.
4. Pay off your mortgage!
Once you have paid off your nonmortgage debt and are investing 15 percent of your income toward retirement, start getting serious about paying off your mortgage as soon as you can!
My husband and I have owned two modest homes, and we were able to pay them both off (not at the same time; one and then the other :)) in less that 6 years. I definitely don’t say that to brag but rather to give you hope and encouragement and let you know that you can totally do it, too! Because we were able to pay off those two mortgages on just one average income, too! But we’re nothing special; we have just been burned by debt and by other stupid financial decisions we made when we were younger, and so now my husband and I are very intentional with our money. We’re not perfect by any means, but we have become savers, and we have figured out a lot of the tricks to win this money game.
Don’t worry; they’re pretty simple, and you can figure them out too! Just keep studying and learning and trying! And you’ll be mortgage debt free before you know it!
Read this article to learn the 7 simple steps that allowed us to pay off our mortgages early!
5. Save and invest systematically to build wealth.
As a final step to financial freedom, save and invest regularly to build wealth so that you can stop working when you want to.
Even if you decide not to shoot for FIRE (Financial Independence, Retire Early), having enough money so that you could retire if you wanted to or needed to is the ultimate level of financial freedom for many people.
If you are currently living paycheck to paycheck or if you regularly overspend, learn how to break that cycle so that you will have money to save and invest to reach your awesome financial goals and to finally reach financial freedom.
By following these simple but crucial steps to financial freedom, you really will be able to achieve financial independence, and you will be able to do it far sooner than you probably ever thought possible.
And while you’re at it, in order to put yourself and your family on wonderfully solid financial ground, check out these cool things to save up money for to run your financial house smoothly.
What does financial freedom mean to you? What steps to reach financial freedom are you planning to follow ? Do you have a goal for when you hope to achieve financial independence? Leave a comment below and let me know—I would love to hear your ideas!
Invitation to Share
Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!
Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.