Achieving Financial Freedom
At some point in your life, you may have encountered the classic phrase, “money can’t buy happiness.” Whoever said this probably had tons of money. Though they are not completely wrong, the topic of financial freedom is very crucial. The best way to interpret the phrase is that having money is not all there is. Not having one is. When you lack financial income, this becomes the stem of many problems such as frustration, pain, and anger. It greatly affects your life and becomes the bases on how you view things in the world. When you lack financial freedom, all issues seem to pivot around money. Though being rich won’t eliminate all problems in your life, saving up some money is a good start. When you are financially free, every decision that you make won’t be about money. You don’t need to accept a job solely because it offers a better income. You don’t have to check the price tag of the clothes you want to purchase to make sure that your money is enough.
The ways to reach this path are very simple, however, it won’t happen throughout one night. Here’s how:
Establish an Emergency Fund
Have an emergency fund and start building it by saving at least $1,000. This money should strictly be for emergencies only. They are not meant for beer money, vacations, or new shoes. This particular stash of money should only be used in case things get too tight in the financial department. For instance, when you need to buy a new water heater, repair your car, or renovate your house. If you save up an emergency fund, you will be less likely to need a personal loan when finances get tight.
Why Does It Pay to Have an Emergency Fund?
No matter how stable your life is going right now, there will always be instances that could steer it into a different direction and make everything go wrong. Instead of using your credit card until you are in a spiral of debts or borrowing money from your relatives again, an emergency fund will be your financial savior. Managing your debt will allow you to more easily get a cash advance if you need one. The best thing about this is it will give you a sense of financial freedom. At last, you will have some space to breathe. This method is the fastest way to regain control in your life
Settle All Your Debts
Debt is considered a natural part of society – at least for the majority. It can develop for different reasons, like buying an apartment you can’t afford, splurging on something you don’t need, or purchasing a brand new car when you could’ve bought a used one. The largest issue with debt is that it obstructs your monthly paycheck. For instance, if you are paying for student debt, mortgage, or car loan that’s worth at least $10-700, it robs you of money you could’ve used for your savings. On another note, you could save a lot of money in terms of interest if you make it a point to pay off your debts faster. This is your most important step towards claiming your financial freedom. For instance, if you have to pay a student loan worth $100,000 with 5% interest for 20 years, and you make it a habit to pay the bank only the minimum amount for the whole period, you’ll end up paying more than $159, 000. Crazy right?
By settling your debts, you will achieve a better credit score. The next time you apply for a high acceptance loan, chances are better that you will receive one if you have a good credit score.
The Most Effective Way to Settle Debt Quickly
There are different ways on how you can do this. Pay off high-interest loans first. Every loan has a different interest rate. The best decision is to address the loan with the highest interest rate first, then work your way down until all your debts are settled. You can also utilize the debt snowball method. It takes advantage of human behavior by paying off the loan with the smallest amount first. Once that’s quickly done, it will help create a momentum that will motivate you to tackle remaining loans from direct lender.
Make A Runway
Do you imagine how good it feels knowing that you have money in your bank account that could last you for 6-12 months? This type of financial stability and freedom will offer you a sense of security during times when you lost your job or broke your car. With this, it is important to have a runway. Get your laptop and open your spreadsheet. Now, list down all of your monthly expenses: groceries, electricity, rent, Netflix, internet, and the likes. Encoding it into a spreadsheet will help you determine which aspect you need the least.
Begin Building a Retirement Fund
Retirement funds belong to those things that you need to do but you haven’t started yet. Personal finance is all about undertaking short-term sacrifices to achieve long-term benefits. If you make it a habit to save some of your money every year, you’ll be able to create a great retirement plan. By managing your finances properly, you will be less likely to need an instant cash loan as you will have reserves.