In order to gain financial freedom, you have to be free of debt, able to provide for yourself, and able to prepare for your future. However, achieving those goals is often easier said than done — particularly in times of economic hardship such as those that much of the world is currently experiencing.
With that in mind, here are six steps that can help you on your way to financial freedom:
1. Keep Thorough Records
If you are living on your own and trying to achieve financial freedom, it can be tempting to rely on automated credit card statements and receipts to track your finances. Keeping track of these things is better than ignoring your records altogether, but it is an even better idea to meticulously track your income and expenses. If at the end of each day or week you record everything you spent and everything you made, you will generally have a far clearer understanding of your own finances.
2. Focus On Relieving Your Debt
If you have significant debt, it is very important to get rid of it as you seek to achieve financial freedom. The best way to do this is to develop a fund used to pay debts every month, and stick to that fund until all of your debts are paid. This is effective, particularly if after paying off one debt, you keep the fund at the same level – allowing you to pay off the others relatively quickly. You should also look to eliminate debts with high interest first.
3. Start A Fund For Emergencies
Even if it’s something relatively small, such as $50 or $100 per month, it is vital to set aside funds for emergencies. You never know when something completely outside of your control will force you to spend money, and having an emergency fund can help to lessen the financial burden.
4. Create A Budget
Once you have set up funds for paying debt and managing emergencies, and you have begun to track your expenses, write up a thorough budget. This will help you when you need to judge whether or not you can spend money on a certain thing. Knowing what you can responsibly spend helps you to achieve financial freedom.
5. Earn Extra Income
Earning extra income is never automatic. However, by looking into investment opportunities, you may be able to generate some additional income. Consider learning stock market strategies, or investing in gold, or even real estate. A successful investment can lead to a great deal more financial security.
6. Plan For Retirement
Finally, it is also important to plan for your retirement. Most retirement plans operate with compounding interest, which means that the earlier you start contributing funds to your plan, the more those funds will grow over time. This can keep your financial freedom effective later in your life, which is an invaluable luxury.
This is a guest post by freelancer David Miller, on behalf of BullionVault.