Today we have a guest post from James who will be discussing the top 11 habits to obtain financial freedom. Please see his bio at the end of the post.
Everyone wants to achieve financial freedom but taking steps towards it, is what makes a difference. Financial freedom is simply a stage where you have enough and you realize it. You are no longer stressed about your expenses and savings. There are different steps to success in the journey towards financial freedom and it starts with calculating the ways that workout for you. Before you reach out to a conclusion and make your list, glance through these 11 habits to follow that can help you attain financial freedom.
11 habits that can speed up the process of reaching your goal to attain financial freedom:
1. Define your financial freedom
To begin with, it is important to define your financial freedom. As each one of us can have a different perspective towards attaining financial freedom. You can define it as:
• A debt-free status
• A bank balance of some million dollars
2. Ready to set your goals?
You can set your own goals to attain financial freedom. All you need to do is divide your goals based on time slabs and prioritize them. List down your goals that you feel will give you financial freedom and categorize them as long-term and short-term goals.
For example, to attain financial freedom you found out you require $10,00,000 in your bank account within ten years. This means you have to save $1,00,000 every year. To save $1,00,000 every year you must earn at least 2,00,000 annually. You can also think about investing your money to increase your saving. Now with this information, you know how to set your goal every year to achieve financial freedom.
3. Have you set your budget?
Budget and finance go hand in hand. Set your budget for every week, month, and the entire year. Try to stick to it. This will force you to save more, spend within your limit and pay all bills on time.
4. How about a debt-free life?
One of the most important things is to pay your bills on time. Debt can be divided into two categories:
• One with higher interest rates and one with moderate interest rates.
• The one which has more than 10% interest rates are under the higher interest rates zone and is considered a dangerous debt.
• Prioritize in getting rid of high-interest credit card debt, car loans, and payday loans.
• Debit with lower interest such as home loan, student loan etc. are fine. They do not lead to financial stress.
Related: 8 Strategies to Pay off Debt Fast
5. Prioritize paying yourself
Start to save a percentage of the income at the beginning of each month rather than saving what’s left at the end. For example, immediately deposit 10% of income on the first day of salary. It is better to automate this saving by setting up automatic transfers with your bank.
Many companies provide life, health, and disability insurance to their employees. These benefit packages, such as a 401k, 403b, or 457, should be taken full advantage. Workplace retirement plans are convenient and also provide greater tax benefit as savings are automatically deducted from the paycheck of the employees. This will leave less money in hand, eliminating unnecessary expenditure.
6. No more emotional spending!!
Spend within your limit. Do not buy anything beyond your set budget just to impress others. As Sophia Amoruso say –“ Money looks better in the bank than on your feet”.
7. Have you thought about increasing your credit score?
How do you use your credit card? Do you know that your credit card can help you save as well?
A credit card helps in developing and improving credit score. Your credit score is based on the credit report. In this report, your payment activity with a credit card plays an important role. So if you use a credit card smartly you will see improvement in your credit score.
The credit score is an important factor in determining the interest rate for a car loan, refinancing home loan, or any other type of load and insurance. So keep on checking your credit score and make sure there is no red mark in your name.
8. Upgrade your knowledge daily!
As Warren Buffet says- “Read 500 pages every day. That’s how knowledge works. It builds up like compound interest.”
Reading on a constant basis is the ladder to success. Read, especially all the financial news, be up to date on the trends in the financial market. Be aware of the changing tax laws. Try and understand the factors influencing the stock market and invest accordingly.
“An investment in knowledge pays the best interest.” – Benjamin Franklin
9. Reuse instead of replacing:
Use all household items specifically the expensive one responsibly. Make sure to use the entire item to the fullest. Try setting up a home maintenance plan, like monthly cleaning of all the appliances like fridge, vacuum, lawn mowers etc. Clean all the furniture at regular intervals. Maintaining them is easy but replacing them is costly.
10. How about a consultation with a financial advisor?
Meeting financial advisor is a great way of achieving financial freedom. Seek their advice, once you have saved enough to invest. Choose a good financial advisor, one who have many years of experience and have positive feedback from his previous clients.
11. Health is wealth!
Healthy people are wealthy. It is said that any exercise or workout tends to increase your productivity. A healthy person takes less sick leaves, is more productive at work and pays less insurance. As people with heavy weight or other medical condition are required to pay higher insurance. Proper maintenance of health and diet will also ensure you retire at an optimum age.
Handling finance might seem difficult initially but once you learn the skill, you can see the fruitful results. Hope these 11 habits would have given you an insight of how to begin your journey to financial freedom.Include some or all of the above habits if possible and see the difference in your financial status.
Bio: James is a finance blogger and writes about personal finance tips and everything about money management.
What habits have you adapted to obtain financial freedom?
Subscribe below for posts regarding budgeting, saving, and investing to be delivered right to your inbox!