What do you think of when you think of the phrase “financial freedom”? Does it mean becoming debt-free once and for all? Does it mean having more autonomy over your time? Does it mean being able to say no to opportunities and yes to others?
Each and every one of us has a different idea of financial freedom. This financial freedom connects to our “why”, which can help you take action with your finances. Once you’ve established what financial freedom means to you, here are five actions you can take to become financially free.
1. Get rid of debt
If there’s one thing that will shackle you down forever, it’s debt. Whether it’s credit card debt, student loan debt, a car note, or all of the above, debt will hurt your finances. The interest on loans can tack on a ton of costs and add a lot to the loan.
When you’re paying down debt, you’re actively paying for your past at the expense of your future. In order to be truly financially free, you need to get rid of debt ASAP. Debt is like your no-good friend that sticks around too long but you don’t have the heart to tell them to get lost. Take back your power, and tell debt to get lost! That is your money and you shouldn’t pay an arm and a leg in interest.
You can use the debt avalanche method, where you pay the minimum toward all of your loans and put extra funds toward the loan with the highest interest rate. You can also use the debt snowball method where you pay the minimum on all of your loans but put extra money toward eliminating the smallest balance loan first.
The avalanche method can save you money on interest. The snowball can help you stay motivated as you can see and feel the smallest loan being paid off. There’s no right way to pay off debt, the key is to pay it off and keep a level of consistency.
2. Cancel subscriptions
These days it’s so easy to sign up for subscriptions. There are meal delivery services, Netflix, Hulu, Spotify, various beauty boxes, etc. The list is endless. Take an inventory of how many subscriptions you have right now. Once you have a list, really evaluate which ones you need and which ones provide value.
To become financially free, you want to limit your expenses. Every expense you can cut now will mean less you need to save for your lifestyle later. So, start now and cancel any subscriptions that you aren’t using. Next, really evaluate whether they’re adding to your life and worth the cost. If not? Ditch those ones too.
3. Negotiate your bills
We all have monthly bills each month that require our hard-earned money. We sometimes think that whatever we pay is what we must pay but in some cases, you may be able to negotiate your bills. You can try and negotiate your cable, internet, phone, and even your rent!
If you don’t ask the answer is always no. There’s no harm in trying. Some companies would much rather negotiate with you than lose a long time customer. If you need some help, you can use a service like Trim to do the heavy lifting for you.
4. Learn the art of saying no
One cost that can be lowered is your going out costs. When friends invite you out, you want to say yes. So, you go, overspend because you end up splitting the bill, and end up spending more than you thought.
You get invited to a wedding that you can’t really afford and don’t want to disappoint people so you say yes. We want people to like us, and we want to have fun so we say yes. But, in order to be financially free we must learn the art of saying no.
Start practicing saying no to friends, no to impulse purchases, and no to sales. You can propose a frugal alternative with friends. You can uninstall social media and block ads. You can unsubscribe from tempting emails. Take action so that it’s easier for you to say no, and you’re not relying on willpower alone.
5. Invest your money
It’s easy to think if we cut back and earn more we’ll reach financial freedom. But, that’s not the whole truth. In order to get the money to truly be financially free, you want your money to grow. You want your money to beat the cost of inflation and earn money while you sleep. The way you can do that is by investing your money.
Investing can be scary for some people. It can feel like throwing money to the wind not really knowing where it’s going. All types of investing come with a level of risk, but it’s a way you can build wealth. You can get started with stocks, bonds, and index funds. You can open an account with a brokerage like Fidelity or Vanguard or work with a robo advisor like Betterment or Wealthfront. The key is to get started now and not waste a moment in your wealth-building journey.
Financial freedom is the destination, but there are pit stops you need to take along the way to get there. Look at your why, and really hone in on what financial freedom means to you.
Having that motivation will make it easier to make these lifestyle shifts and keep your eye on the big picture. So, whether your dream is to quit your job or retire abroad or finally pay off that debt, there are steps you can take now.
Will it be easy? No, nothing that is worth it ever is. But it will be rewarding in a way you haven’t experienced. So, start today by taking these five actions, which can help you reduce expenses and grow your money so you can reach your version of financial freedom.