Posts contain affiliate links, see disclosure for more details.
Set yourself on the right financial path
For many people, gaining financial freedom is more than a goal, it’s a dream.
Yet dreams tend to imply it’s something out of reach or unrealistic.
However, financial freedom isn’t just reserved for those who ‘got lucky’ or were born into money.
Having enough savings for retirement and cash to support the lifestyle that we want, is something that we can all achieve.
Unfortunately, so many of us are unable to do so currently due to rising debt, financial emergencies and poor financial education.
This however, doesn’t mean to say we are helpless but does imply we need to adopt more financially beneficial habits.
By implementing these 8 habits of the financially free, you’ll be on the right path to acquiring wealth and protecting yourself, no matter the financial climate.
1. Set Life Goals
What is your own definition of financial freedom?
A general desire for money is too abstract, so be precise.
Write down how much you’re going to need in your savings account to facilitate your idea of a financially free lifestyle.
Then ask yourself, at what age are you realistically going to be able to achieve this?
From here you can start to flesh out a plan of action in accordance to your answers.
Just remember, the more precise and realistic your targets are, the greater the probability of meeting them.
A useful tip is to break your goals down into smaller, more manageable pieces.
This will help you stay on track day to day and not make the task at hand seem so daunting.
Write it all down neatly and mark the aim sheet at the very start of your financial binder or notepad.
2. Make A Budget
Having a monthly household budget—and sticking to it—is the best way to ensure that all expenses are paid and savings are on track.
It’s also a regular ritual that confirms your priorities and strengthens your determination against the desire to buy things you don’t really need.
Again, the more detailed your budget, the better.
Consider categorising your spending and putting caps on each area of your finances to give yourself as much control as possible.
There are a variety of money management apps that provide such features and help to bring another layer of reinforcement for your goals.
3. Create Automatic Savings
Pay yourself first.
By putting money aside for your future self, you give yourself the resources down the line to invest or build an emergency fund.
Ideally you should put in place a system whereby the money leaves your account upon arrival, so you don’t even see it.
The idea behind this is that you can’t then cheat yourself out of saving by telling yourself you need the money for something unimportant.
Not to mention the fact it doesn’t require you to remember to transfer your funds every pay day.
There are a whole host of automatic savings apps that allow you to start off small and work your way up.
Even though the amounts you initially save may seem trivial, they will begin to add up over the weeks and months to a sizeable sum.
Read more: Save money automatically with Plum >>
4. Start Investing Now
Usually, people doubt this but traditionally, there has been no better way to grow your money than by investing.
The magic of compound interest will help to increase your money exponentially over time.
Just don’t pretend to be a stock picker or trick yourself into believing that you might be the next Warren Buffett.
There can be just one Warren Buffett.
Instead, open an online brokerage account that makes it easy for you to learn how to invest, build a manageable portfolio and make weekly or monthly contributions automatically.
5. Watch Your Credit Score
Your credit score dictates the interest rate you are offered when purchasing a new car or refinancing a home.
It also affects otherwise unrelated items, such as auto insurance and life insurance rates.
The rationale is that anyone with irresponsible financial habits is more likely to be careless in other areas of life, such as driving and drinking.
That’s why it’s important to get a credit report at regular intervals to make sure your managing and building your score.
Many people are reluctant to negotiate the price of goods and services, fearing that they seem cheap.
Overcome this cultural handicap and you will save hundreds, even thousands every year.
Small companies, in particular, appear to be open to negotiations, where buying in bulk or re-business will open the door to good discounts.
In terms of supermarket shopping, look for cheaper alternatives to big brand names, you’ll save money and possibly end up liking that product more.
It’s a lesser known fact but many supermarkets pay big brands to create like-products for them, the only difference being the packaging.
Read more: 13 easy ways to slash your grocery spend >>
7. Never Stop Learning
I consider this habit to be the most important on this list because without the wiliness to learn, how will you ever progress?
Now I’m not necessarily referring to the conventional education routes such as college, university etc.
I’m referring to self education which comes in the form of books, courses and overall, a desire to invest in yourself.
Applied to a financial context, learning about how to properly utilise money makes all the difference.
You can earn all the money in the world but with poor financial knowledge, it’ll often end in disaster.
Here are a few key areas in which learning could save/earn you a great deal of money:
- Tax – Review the relevant changes to the tax code in your country each year to ensure that all modifications and deductions are maximized.
- Financial Climate – Keep up with financial news and stock market trends
- Literacy – Awareness is the strongest protection against those who are preying on unsophisticated investors to make a fast buck.
8. Live Below Your Means
Mastering a frugal lifestyle and getting into the mindset of living life to the fullest with less is not as hard as you may think.
Indeed many wealthy people have developed a tradition of living like this.
This lifestyle goes hand in hand with that of a minimalist and requires little more than some mental strength and a few trips to the dump to sustain.
Moreover, exercising the art of distinguishing between what you need and what you don’t is never a bad thing, particularly in the context of finances.
So be sure to put this habit into practice!
Final Thoughts On Financial Freedom
These 8 tips will not fix all your money problems, but they will help you develop healthier habits that will lead you on the path to financial freedom—whatever that means for you.
Just take your time in mapping everything out, stay disciplined in upholding your targets and actively optimise your lifestyle to become finically free.
Hi, my name is Dan. I’m known for being a personal finance enthusiast and proud owner of The Money Equation. The personal finance blog that explores avenues of making money, financial products reviews and much more!
Also read: First steps to FIRE (financial independence, retire early) >>