We all know the stress finances can cause in our day-to-day lives, and it is often crippling. We may even feel like we are on the path towards financial freedom for a time but then, as it always does, life throws a curveball. The unexpected car problem hits, financial markets crash, real estate values decrease, your once stable job is making layoffs, the list goes on and on.

Uncertainty is the only certainty that we have in this life, and it causes us to stress and, when stressed, our perspective gets distorted.

We either zoom in on the problem, making it feel bigger than life, or we put our heads in the sand, avoiding the problem altogether. Ultimately stress eliminates the abundance of choices and opportunities around us, blinding us to the many paths forward.

If stress makes us blind to the path, how do we find a way forward, and what does the path even look like?

Imagine a world where the unexpected happens, but you have a plan in place for it. Where your car has a flat tire, and you just fix it: no stress and no worry. What used to be a financial mountain turned into a financial molehill.

Want to learn how to get there and obtain true financial freedom that oozes out into your personal life?

1) Understand Your Starting Point

First Things First, To get where we want to go, we must first know where we are now. This step is so critical yet often overlooked. If you are training for a marathon, your current physical condition, training habits, and mental mindset should all be looked at and honestly assessed. When this step is missed, we feel like we are failing, but, in reality, we have just skipped too many steps to be successful. 

Where you start matters and identifying that honestly is crucial to your success, so what are the things we need to be honest about? Well, ideally everything, but to gain financial freedom, these are an excellent place to start: 

  • Get honest about your relationship with money. 

We all have feelings and grew up with expectations regarding money, what it would give, the type of people who have a lot or none, and the power or lack thereof it provides.

The relationship you have directly affects your behaviors and decision-making. Your financial journey is 80% behavior and 20% knowledge, so focusing on knowledge while ignoring the behavior is like a sailor preparing to set out on the ocean without a boat; it just doesn’t make sense. Whatever your relationship with money, let’s identify it and accept it. Only then can we build the foundation for lasting financial and personal freedom. 

  •  Be honest about your financial situation

Financial freedom is impossible living paycheck to paycheck. I know it can be scary, but how can we ever change if we can’t acknowledge where we are? Cultivating and sustaining financial freedom requires honesty and acceptance of where we are now and the best/only way to get that information is from a detailed look at your budget.

We must be purposeful with every dollar we have because everyone ends up somewhere, but few people end up somewhere on purpose. This journey never stops. Even once we are financially free, have our safety net in place, and have created financial margin, we must still budget and be purposeful. Being purposeful with our money is not something we do, but it is who we are if we truly want to be financially free. 

2) Manage Your Money

You will not make lasting or sustainable changes without learning to manage your money and follow a financial plan. It just doesn’t work. There is no shortcut to financial freedom, If that were the case, then lottery winners would never go broke, and professional athletes would be able to retire quickly. When you fail to plan, then you plan to fail. 

If you are married, get on the same page with your spouse; if you are single, get an accountability partner. Without someone keeping you accountable, whether single or married, it will make your journey that much harder. 

Creating a plan for your future feels daunting, but like with all things in life, it is just about taking it one day and one step at a time. 

A good financial plan starts with your goals, and we need to break these goals into three realistic time frames.

  • Short-term goals are goals that can be achieved in the next three years. These can range from paying off debt to saving for a honeymoon.
  • Medium-term goals are goals that can be achieved in the next three to ten years. Examples are down payment of a home, expanding or starting that business, buying a rental property, etc… 
  • Long-term goals are goals that are ten years or longer which includes retirement and saving for your kid’s college.

Once you have listed your goals, let the goals direct your decision-making and behaviors. 

No financial plan is complete without a reasonable budget. Understanding where and how you spend your money is key to creating financial margin. If you can consistently make more than you consume then you have financial margin. I will take margin over income any day of the week and twice on Sunday. 

3) Clean Up Your Finances

We all have made and continue to make financial mistakes. It is part of life. But how we address and learn from these mistakes is critical to financial freedom. Before we can gain wealth, we must clean up our financial house first! 

That means if you have debt, primarily credit card and students loans, then it is time to get serious about eliminating them. There are several excellent options for eliminating debt, like the Debt Snowball and Debt Avalanche methods. 

When we have debt, all we are doing is limiting the income available to us, and it crushes our ability to create financial margin and create the financial freedom we desire. How can we build our own house when we are busy building someone else’s mansion? 

We don’t need to avoid credit cards and student loans at all costs, but we must plan to use them to our advantage. 

Want to learn how to use credit cards to your advantage? Click here!

4) Invest In Your Future

I have always loved the great Warren Buffet. His investing insight and ability to hold steady to his principles is what has made him the most significant investor of all time. One of his many pieces of timeless wisdom is, “If you don’t find a way to make money in your sleep, you will work until you die.” 

The importance of making your money work for you and not against you is critical. The sooner you invest, the more time compound interest has to work its magic. I would highly suggest talking with a money expert about your options and ways to invest that make sense for you and your unique financial situation. There are several ways to make your money work for you, but here are some of my favorite to use.

Investment Vehicles: 

I will briefly touch base about some investment vehicles and describe each below. I would highly suggest clicking the links to get clarity on each type of investment vehicle and which ones could be utilized for your specific goals and financial plan. 

Stock Market – 

The stock market is my favorite way to grow income passively. The S&P 500, since its inception, has averaged between 10 – 11% each year with the opportunity for much more! There are multiple ways to invest in the market, and I will list a few of the most common ways to get involved in the stock market below:

  • Mutual Fund(s)
    • A collection of highly curated investments to create a balanced approach to investing. The mutual fund pools money together from those who invest in the fund and the fund manager selects from a variety of investment vehicles ranging from stocks, bonds, commodities, and real estate. Thus when you buy shares of the mutual fund, you are actually getting exposure to all the investments inside the fund. 
  • Stocks
    • Simply put you can buy shares of individual companies through brokerage accounts. This allows you to profit from growth in the company while becoming an owner of the company you purchased shares in. 
  • Bonds
    • In simple terms, bonds are the chance for you to loan companies/institutions money for a fixed amount of interest. Bonds pay out interest payments over time for you loaning money to the given bond issuer. This represents a lower risk with moderate returns. 

Retirement Accounts –

Taking advantage of tax-advantaged retirement accounts is a fantastic way to set yourself up for long-term financial freedom. If your employer offers a 401(k) matching program, make sure to take full advantage of the match and collect that free money!

Traditional and Roth IRAs are also fantastic options for saving for retirement. You receive either tax-deferred (traditional) or tax-free (Roth) benefits when you invest in an IRA. Both are great options for retirement and have a place in your long-term retirement plan. 

When you invest in a Roth IRA, your money grows tax-free! That makes a massive difference in the amount of money you can keep over the long term. 

Traditional IRAs give you a tax break today for investing, and then when you withdraw money, it is taxed. 

Ultimately the IRA you choose will be directly impacted by your unique financial situation! Tax evasion is illegal, and tax avoidance is wise!

Real Estate Investments –

Your home should be not only a place you live but also an excellent investment that leads to your mission of financial freedom. If you choose a home wisely, it will continue to appreciate for the years to come. We must be diligent in the kind of home we purchase and how we finance the home. The right home with the wrong financing can be a liability rather than the asset it should be. 

Rental properties are an excellent way to build wealth and create ongoing, consistent income. You can even use them to live rent-free! 

There are many ways to grow your income passively, but it is all about managing the risks and creating the margin in your life to invest freely. Find someone to help educate you and create a plan to grow your money according to your goals. Remember, no step is more important than the next. As Dory would say, “Just keep swimming”! 

5) Be actively involved in your financial future

Once you have laid your foundation, don’t stop working! Your financial plan requires constant attention and adaptation. Everything from actively managing your money, updating the budget, and optimizing investments must become a regular part of your life. 

Managing your money can feel overwhelming. Get with a financial expert to help walk through this journey if it feels that way. 

A good financial planner can help with:

  • Creating a sound investment strategy
  • Creating your financial plan that aligns with your goals
  • Keeping you on pace for retirement
  • Holding you accountable to your goals
  • Reducing financial stress

Ultimately financial freedom isn’t easy, but it is attainable. No matter where you are on your financial journey, it is never too late to start, and there is always a way forward. Embrace the journey. Cultivate personal and financial freedom. And always remember, you’ve got this!

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Last updated on March 16, 2022