What is the first thought that comes to your mind when you think about financial freedom? Is it being able to buy any car you desire or being able to buy your own home? Everyone has their own version, so defining “financial freedom” is difficult. However, it is often referred to as a feeling of security around money, which is a process that doesn’t happen overnight for most individuals. Luckily there are many steps you can take today to start or continue your path to become financially free.




Outline Your Long and Short-Term Goals


A very thoughtful way to get to your financial goals is to set both long and short-term goals. Long-term goals are milestones that you plan to reach in 10 or more years. Short-term goals, on the other hand, are plans that you aim to reach in less than 10 years. Youmust think differently depending on which kind of goal you want to achieve. For example, if you are wanting to save up to place a down payment on a home in 4 years, then you may consider planning for the short-term. Long-term goals are different because they are able to follow a flexible plan in order to be reached. Situations in your life change, and your long-term goals should change with them.


If you want to be able to afford big investments, you will have to consider changing your saving habits. The first step when coming up with a savings plan is to assess how much money you have in savings and how much you will need in total. Once you determine how much money you need to save up, you will have to decide if you want to keep it in a savings account or move it to another type of account. Savings accounts are great for short-term goals because you can readily access your money. If you don’t mind setting the money aside for a while, you have a couple of other options to consider. You may consider putting your money into a certificate of deposit or in a money marketing account. A certificate of deposit (CD) will give you a higher annual percentage yield (APY) so that you earn more over a longer period of time. A money marketing account has withdrawal limits, and generally has an APY higher than a savings account but lower than a CD. Whichever account you choose, stick to a goal of putting a certain amount of money in savings each paycheck. The most important part is following through every time- if you start to miss a deposit here or there, you will fall short of your goal.



Useful Strategies for Saving Money


Those interested in truly experiencing the benefits of being financially free should think about paying off debt before anything else. One of the biggest money suckers happens to be debt and the late fees that come with it. Financial debt can quickly accumulate and the best way to break yourself free is to start from the bottom up. If you are already sitting on a mountain of debt, don’t get overwhelmed: start paying what you can and slowly chip off those financial burdens.


After you get into the flow of paying off your debt consistently, you will have the opportunity to put your money towards better things, such as your savings account. That brings us to another avenue to save money and contribute to your freedom- budgeting. It is often difficult to cut down on expenses if you do not have much money saved up to begin with. However, being debt-free (or working towards it) will help you see that you have the power to live beneath your means. For example, if you budget and plan out your groceries before you arrive at the store, you’ll likely spend much less money. Instead of going down each aisle, you can avoid items that you didn’t need in the first place. It’s easy to see a snack and automatically throw it in your cart if you don’t have a list to stick to.


You should also consider switching to generic foods that cost less and taste just about the same as their more expensive counterparts. Stores like Aldi and Walmart often have great alternatives for cheaper, and it adds up over time. The money you save can be allocated towards other items in your budget or put into savings.



Investment Strategies

Once you have the basics of budgeting and saving down, you can work on investing your extra money. Compound interest can exponentially grow your money, but it takes quite a bit of time. You can start investing in retirement savings by opening a 401(k) with your place of work or an individual retirement account. You get to choose where you invest your money, which means you will need to decide between stocks, bonds, and mutual funds. Stocks are better for long term investments, as they will accrue more money over time. Bonds, on the other hand, are better for shorter term investments. You’ll know exactly how long it will take to receive the money back, as well as how much interest you will make in the meantime. Mutual funds are investment packages that choose both stocks and bonds for your portfolio. It’s generally less risky than stocks while still allowing you to accrue interest over long periods of time. If you don’t have a 401(k) through your job or want to invest savings for a goal other than retirement, you can open a regular investment account with a number of online brokers.





Managing Your Credit


Credit can be a tricky subject for people not familiar with the process, and putting your credit at risk can be something that you regret very quickly. Maxing out your credit card may also be a sign that you need to downgrade on high-ticket purchases. It may seem very enticing to spend the rest of your credit on a night out with friends (beware of spendthrifts!) but it’s really not worth the long-term debt. Understanding your credit is a very important part of your journey to becoming financially free.


Your credit score is what lending companies use when determining whether or not you are trustworthy in paying your bills. If you have bad credit, you may not be able to borrow money for large purchases, such as a house, and can cause your interest rates to go up. One way you can strategically improve your credit is by diversifying your credit accounts, as long as you are able to routinely pay each account off. You can also take advantage of the various types of credit such as mortgage loans and installment loans. Essentially, do not be afraid of using credit but always make sure that you are using only what you really need and can keep your balance in control.



Learn More from Financial Industry Experts


No matter how much research you do, there will always be more to learn. Regularly consuming content such as books, podcasts, and other resources can aid you in your financial freedom journey.Some of the top books recommended by financial advisors include The Richest Man in Babylon, The Only Investment Guide You'll Ever Need, and Happy Money: The Science of Happier Spending. These books can help you build a better understanding of your finances.


The first book mentioned, The Richest Man in Babylon, is a resource that you can read to learn about financial truths that have existed for the past 100 years. The book was originally published in 1916 by George S. Clason, but these financial truths are still relevant in the 21st century. This particular book may be very appealing to you if you are young and a fan of learning through realistic and relatable stories. It really brings to light that your financial independence has nothing to do with stock market trends stock performance- it’s all about the work you put into it.


The Only Investment Guide You'll Ever Need is a helpful guide that teaches you all things budgeting, saving, and investing. It was written by Andrew Tobias who is very experienced in the stock market, and he makes it clear that it is a waste of time to try to create theories and predictions about the stock market for the purpose of financial gain. This may be the perfect book to learn from if you are desiring to save for the long-term.


Lastly Happy Money: The Science of Happier Spending is written by Elizabeth Dunn and Michael Norton, who believe that spending should always be done using a strategy. This book gives an interesting angle about how spending mindlessly doesn’t give you as much satisfaction as it would if you spent your money thoughtfully. The book mentions that expensive items are often purchased impulsively and individuals are usually happier when they plan out their spending in advance.


There are also many online avenues to help expand your financial knowledge, including forums where you can ask questions and get tailored advice from others who may have been in your situation before. You can also learn from other people’s specific experiences, both positive and negative. Take advantage of as many resources as you can!





Create Your New Budget Plan to Start Now

Once you take the time to assess where you are financially, you can create a plan for yourself to succeed. Your financial happiness is defined by whatever you believe is important. By understanding that, you will have the knowledge to make sound decisions about how much money you should save and how much you can afford to spend on your lifestyle. The best way to reach any seemingly far-fetched financial milestones is to create a plan for yourself and stick to it, including a little extra allowance for tougher months. Once you attain financial freedom, you’ll feel secure and happy about your financial status.