Many financial advisors have observed that the majority of people spend more time planning their vacations than they spend planning their route to financial freedom. It’s sobering news but the good news is that now is just as good a time to start mapping out that path as any other. Who doesn’t dream of having enough money and being able to retire early and travel the world or just sit back with family and friends? Financial freedom will allow you to have that lifestyle. Having an emergency fund, life insurance, adequate health insurance, and being debt free are all parts of attaining financial freedom. Here are some steps to help you get started today.
Make A Budget
You’ll get a good picture of your financial health by creating a budget. List your monthly income at the top and then start subtracting all of your expenses. If you have a lot more left over than you had expected, there’s a big black hole that needs to be found. Start tracking where each penny goes and within a week, you’ll know where you need to cut back on your spending. Use the extra money to follow the next steps.
Start An Emergency Fund
Everyone has those days or weeks where one thing after another breaks–first the car tire, then the washing machine and finally an emergency trip to the vet. When you have money specifically set aside for these emergencies, they just become inconveniences. Think of it as your own little insurance fund for the unexpected. Start off with $500-$1000 and then once you are debt free, add to it until you have the equivalent of three to six months worth of expenses.
Find Cheaper Insurance
Most people don’t have the right kind of coverage for their needs. Review your policy and see if you can find cheaper insurance for your health care.
Buy Life Insurance
If anyone depends on your income to meet their needs, either directly or indirectly, you need to have life insurance. Buy a policy that will give the beneficiary eight to ten times the amount of your annual income so that, if you pass, they can invest it for the long term and live off of the interest.
Pay Off Debt
Make a list of all of your debts and decide how you will attack them. You should pay minimum payments on all of them but then decide which one you will throw all your extra cash at, either the one with the highest interest rate or the smallest overall balance. Financially, paying the highest interest one will save you a little more money, but you’ll get a psychological boost by paying off your smaller debts sooner. Chose one and then stick with it.
Once you have finished these steps, there’s not much more to do other than save, save, save. Save early and often and you’ll be financially free before you know it.