The following is adapted from Down Home Money.
As you visualize your future, what do you see? Do you see carefree days enjoying the fruits of your labor with the people you love? Or do you see yourself working far beyond retirement age to continue to pay for things you bought in your thirties?
If you don’t have a plan to secure the freedom that comes with financial independence in your future, it’s time to get started. You don’t have to be a millionaire now to be a millionaire later. There are many steps, sacrifices, and decisions on your journey to financial freedom, but anyone can reach this goal. This means you!
Steps You Can Take For Your Journey To Financial Freedom
Start thinking big and taking responsibility for your current financial situation and you’ll be well on your journey to financial freedom. I’m living proof that this plan works. I started my journey as a 20-year-old hairstylist in debt who worked and saved her way out. If you’re willing to make some sacrifices, you can do the same. Here’s the plan you need.
1. Know Your Big Why
You have to know what you’re striving for—your big why. Knowing your motivation helps you to make sacrifices, change your spending habits, and save for your future.
Do you want the freedom to choose whether or not you work? Do you want the freedom to travel? And do you want to spend quality time with family and friends instead of giving them your tired, exhausted, overworked self? Those are ALL reasons to be free. To pursue financial freedom, you have to sacrifice today and delay gratification. That process takes years, but stay on track.
2. Know Your Net Worth
You have to know where you are to know where you are going. Sit down and document your assets and liabilities. Assets are anything you own that has real value (like your home), plus your retirement accounts and bank accounts. Liabilities include any money you owe on those items or other debts (for example, school loans or credit cards).
Assets minus liabilities equals net worth.
If your liabilities are greater than your assets, your journey to financial freedom should start by earning more money and paying down debt.
3. Pay Down Debt
Paying down debt is a crucial part of achieving financial freedom. Debt is a monster that steals joy and freedom. If you are deep in debt, you may not be able to quit the job you hate because you have to pay the monster.
Don’t be a slave to debt. Instead, take action! Focus on credit cards and debts with the highest interest rate and start paying down the balance. When one is paid off, move on to the next. You have to make a conscious effort to pay down debt and purposely live on less. It should be a top priority.
4. Live on a Budget
Okay, I’ve said it. You need to live on a budget. Do you make $3,000 a month? You cannot spend $4,000. You will never get ahead. In fact, in a few years you’ll be so far in the hole you might never get out.
If you don’t learn to live off a budget, you will owe your soul to consumer debt and you will be a slave to your job. Learn to take control of your money instead of letting your money control you.
Know what’s essential for big expenses like housing, food, insurance, and transportation. Don’t forget to include retirement contributions and saving for your passive income investments.
Regarding your housing budget, ask yourself this: are you living in more house than you need? A good rule of thumb is spending no more than one-third of your income on housing. If you’re spending more, it might be time to downsize to save money for your future self.
It also might be time to sell your expensive car and buy something you can afford. Remember, a car is not an asset. It continues to decrease in value the longer you own it. Sell the car, buy one you can pay cash for, and put the money you save on monthly payments toward assets that give you a passive income.
Creating and sticking to a budget will come with tough choices. Remember, you are building a financial empire based on your big why.
5. Build a Reserve Account
When making your budget, you should include a line item for building a reserve money market account (a money market account earns more interest than a regular savings account). Your ultimate goal is to have six months’ worth of reserves.
A reserve account provides a safety net for you and your family. Even if you start with only $20 a month, I recommend having an automatic transfer into this account so it is a non-negotiable part of your budget.
If you learn nothing else from this book, learn this: create a reserve savings account and work toward having a balance equal to six months of expenses. That will give you peace of mind knowing you are covered in case of a job loss or an emergency.
6. Track Every Penny
Most people hate this tip, but it’s the most effective way to save money. Tracking every penny is how I learned what I was wasting my money on.
Do you know how much you are paid hourly? If you earn $40,000 a year, then you’re making approximately $20 an hour. How often do you go out to eat and pay $20 for a meal? That means you worked an hour to pay for that food. If you know this up front, you may decide you don’t need to eat out so often.
Tracking every penny helps you put things in perspective. When I started looking at how much I had to work to pay for a new pair of shoes, I realized quickly that I didn’t need another pair of black sandals. The ones in my closet were just fine.
7. Declutter Your Home, Declutter Your Life
When you declutter your home, you gain a different kind of freedom—freedom from stuff. We all have so many things we just don’t need. I couldn’t believe how much clarity and freedom I gained when I cleared out my closets and drawers. Now I do it once a year.
Another benefit of decluttering your home is that you can make money from selling your stuff! Use that money to start or add to your reserve account, or start a retirement account and buy some index funds. If you’ve met your goals, then go treat yourself to an ice cream!
8. Max Out Your Retirement Contributions
Whether you have a traditional IRA, a Roth IRA, a SEP IRA, or a 401(k) through your employer, max that thing out. If your employer matches your contributions, even more reason to contribute the maximum allowable.
When you open your own IRA, set up automatic monthly contributions from your checking account so you can pay yourself first. Learning to pay yourself first is an integral part of becoming financially free.
9. Make Your Mortgage Payment Biweekly
If you pay your mortgage biweekly instead of monthly, you can knock off years of interest. Paying biweekly means you pay half of the stated mortgage every two weeks. Since there are twenty-six biweekly periods, paying biweekly means you make one extra payment a year, which results in a significant decrease in the time to payoff. You can reduce your loan period by nearly five years without changing anything besides when you make your payment. (Check with your lender to get the details.)
10. Start a Health Plan
Starting a personal health and wellness plan changed my life. In 2018, I started walking every morning, and now I’m up to five miles a day. This is my therapy, my time to reflect on where I am and where I’m headed.
We have only one opportunity to do this thing called life and only one body to do it in. Take care of your body so you’ll look good and feel good while you’re enjoying financial freedom.
What Money Can Do
Money is only good for the good it can do. Money has given me significance and the opportunity to make a difference in people’s lives.
What will financial freedom do for you?
Remember that financial freedom is a journey, not a destination. Money won’t give you contentment, joy, or peace. It will give you options to decide the kind of life you want to live and your joy and peace will come from within. You’ll find that the best things in life are not things; they are family and friends and time spent making memories together.
Good luck on your journey to financial freedom. It’s not easy, but it is simple and so worth it.
For more advice on steps you can take to reach financial freedom, you can find Down Home Money on Amazon.
About the Author
Myra Oliver is a Kentucky girl who started her career as a hairstylist and became a real estate broker/investor and entrepreneur. She currently owns multiple Keller Williams Realty franchises. After earning enough passive income through smart saving and real estate investments, Myra sold her hair salon and retired in her thirties. Three years later, she found her passion in helping others build their own streams of passive income through real estate investments. Myra lives in Denton, Texas with her husband, Rick, and their chihuahua, Izzy. To learn more about financial freedom and living your best life, visit her website, downhomemoney.com.