How to Reach Financial Freedom
7 concrete steps
Happy Tuesday. Hopefully your week is off to a great start. Have the past couple weeks been crazy busy for anyone else?
Let’s Talk Financial Freedom
Several of you have sent us questions about financial freedom, so today we’re diving deeper into what it means and how to reach it.
What is Financial Freedom?
Financial freedom is when an individual or household can cover their basic living expenses, save for the future, and pursue their desired lifestyle without being constrained by financial concerns.
That said, others sometimes define it as the ability to live your ideal lifestyle without working a normal job. Define it how you’d like.
Yet another way to look at it!
How To Reach Financial Freedom
This is a basic outline of how to reach financial freedom. Don’t take it as the gospel – everyone’s situation will be slightly different.
Determine Your Threshold for Freedom
Financial freedom is mostly a feeling – do you feel like you’re able to balance everything well? Or is your income not supporting the lifestyle you want to live?
Also, how expensive is that lifestyle? A $40k/year salary might provide someone in rural Wisconsin with financial freedom, but it wouldn’t get me over in Massachusetts very far. What is that threshold for you? Get clear on it so you know what you’re working towards.
Start an Emergency Fund
The financial move that gave me the greatest sense of security was creating an emergency fund. This is a stash of cash set aside specifically for true emergencies.
Most experts recommend saving anywhere from 3-6 months of your average monthly expenses for your emergency fund. Storing it in a high yield savings account is also smart, given that you can earn extra interest as the cash chills in there.
Become Debt Free (Minus Your Mortgage)
It’s hard to feel financially free if you’ve got debt spiraling out of control in the background. Create a solid debt payoff plan and follow through until it’s gone. More on the most effective debt payoff method:
#stitch with @Korosh Farazad the debt avalanche method is more effective than the debt snowball method. Higher interest rates increase the... See more
Save for Retirement
If you have high-interest debt, prioritize debt payoff first. It’ll be tough to out-invest debt at a 25% interest rate. 😅 If you only have low-interest debt, you’ll likely pursue this step simultaneously with the step above.
There are a lot of ways you can approach investing for retirement. And while we can’t tell you specifically what to invest in, we can say that index funds are a great option.
This creator offers a ton of incredible information about investing. He even has a super affordable course that walks you through how and what to invest in. (I’ve met him a couple times, and he’s great. We’d only recommend something we truly believe in.)
Build a Budget
You can’t manage what you don’t track. It’s imperative to know what money is coming in and where it’s going out. Find a method that works for you – whether that’s a budgeting app, a spreadsheet, or a sticky note taped to your forehead for all I care. Just keep track of where your money is going so you can make it work harder for you.
Create a Savings Plan & Automate
Once you’ve got a flow for your budget, find some wiggle room. What can you afford to set aside each month toward savings goals?
Be smart about what you save for. Things like a down payment on a home, a new car, or a vacation make sense to save for. Things like retirement or your child’s future education do not (invest for these goals instead).
If it feels good to you, automate your savings. Most bank accounts allow this. And if you want to be even one more step ahead, put the money into a high yield savings account like Ally Bank to earn interest on your savings.
Their bucket feature really just scratches an itch in my brain. 🤌🏼
Maintain What You Have
One of the most interesting recommendations around achieving financial freedom? Taking care of what you have.
From the literal sense, keep up with the maintenance when it comes to items like your car, your house, etc. And most importantly, take care of your health. Minor issues can snowball into massive ones, landing you in a sticky financial situation.
As always, 3 cool opportunities for ya!
This influencer and CEO is looking to hire a part-time community manager to manage content, scheduling, posting, and light editing for their social media channels.
Curated is a website that allows users to get personalized, expert advice from people like you. Experts get paid an average of $2,000 per month for around 15 to 25 hours per week. You can provide advice on pretty much anything – from the best skiing equipment to buy to the best baby supplies to get.
A sustainability-focused group is looking for an SEO copywriter to write about green tech. You’ll need to be able to translate the copy to French. (Bilingual friends rise up!)
Want to see a specific type of work? Just let us know.
See ya Friday,