How to Start Your Financial Freedom Journey
July 4, 2020
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2020 has been a hard year. This July we want to reflect on independence a little differently.
We’re going to help you figure out what it means to you and start you on a plan to get there.
Financial freedom means different things to different people. In fact, it’s had to.
We have a lack of financial inclusion to thank, at least in part. Traditionally, marginalized people have been excluded from resources that privileged groups were not.
This Forbes article says there are eight levels to financial freedom.
Today, we’re going to keep the definition simple and inclusive. Financial freedom is the ability to make enough money to lead the type of life you want without financial pressure.
Yes, it’s very broad. We know. But it also gives you the freedom to decide what that means to you.
Using our definition, here are the steps you can take toward your financial freedom.
Tracking spending used to be very difficult. Very few of us have the time to track every single transaction we make throughout the day, but don’t worry—now, there are tools do it for you
Online banking companies and budgeting software are making it easier than ever before to let tech do the heavy lifting.
Sync your bank with your software and your spending automatically gets tracked.
Since half of American households live paycheck to paycheck, it’s important to know what you’re spending. Without much disposable income, you want to keep a close eye on what’s coming in and what’s going out.
Set yourself up with digital tools. Use them for a month and get to the bottom of where your money goes.
Figure out your needs and wants in your monthly spending. Calculate how much you need to cover your basic expenses like rent, food, and water. Then, figure out how much money you need to cover your wants comfortably.
Freedom means being able to cover your luxuries, too, so let’s plan for it.
For everyone, financial freedom means having enough cash on hand to deal with the unexpected.
Once you can see your current spending, you can make the right changes. You’ll quickly see where you can trim fat.
That might mean ditching a couple of subscription services you don’t need, scaling back on late-night pizza orders, or cutting back on online shopping.
With the changes you make, start building an emergency account. Generally three months of basic expenses is a good emergency account.
Calculate how much you want to set aside and then make a timeline to reach it..
When you’ve hit your emergency goal, keep saving into a savings or retirement account to make your money grow.
What does financial freedom mean to you?
For some, it may mean cutting all major expenses, selling valuables, and moving to a low-rent area working only a few hours a week. For many, it means working a steady job and building savings to retire at 70.
The two important pieces are that you know how much money you need to be happy and making a plan to get there.
Once you’ve made your definition, it’s time to invest in resources to get there.
If you’re taking the traditional route of rising through your industry, look at other successful people and try to copy their success. Ask professionals for advice. Take community college courses. Put in as many hours as you can and ask for feedback.
You may want to change industries, which may mean setbacks. Make some budget cuts to speed up your savings to build a small nest egg to help with the transition.
Nobody is an island and nobody becomes successful without help. A community is only as strong as its most impacted people.
When you do reach financial freedom or success—whatever that means to you—give back. Try to help people less fortunate than yourselves get what you got, learn what you learned.
And it’s never too early to start.
Progress may be slow, but if you start now by next July you can be somewhere.
Varo (Varo Money) is not responsible for the content, accessibility or availability of linked sites.
2020 has been a hard year. This July we want to reflect on independence a little differently.
We’re going to help you figure out what it means to you and start you on a plan to get there.
What is financial freedom?
Financial freedom means different things to different people. In fact, it’s had to.
We have a lack of financial inclusion to thank, at least in part. Traditionally, marginalized people have been excluded from resources that privileged groups were not.
This Forbes article says there are eight levels to financial freedom.
Today, we’re going to keep the definition simple and inclusive. Financial freedom is the ability to make enough money to lead the type of life you want without financial pressure.
Yes, it’s very broad. We know. But it also gives you the freedom to decide what that means to you.
How do I achieve financial freedom?
Using our definition, here are the steps you can take toward your financial freedom.
1.Track your money
Tracking spending used to be very difficult. Very few of us have the time to track every single transaction we make throughout the day, but don’t worry—now, there are tools do it for you
Online banking companies and budgeting software are making it easier than ever before to let tech do the heavy lifting.
Sync your bank with your software and your spending automatically gets tracked.
Since half of American households live paycheck to paycheck, it’s important to know what you’re spending. Without much disposable income, you want to keep a close eye on what’s coming in and what’s going out.
Set yourself up with digital tools. Use them for a month and get to the bottom of where your money goes.
Figure out your needs and wants in your monthly spending. Calculate how much you need to cover your basic expenses like rent, food, and water. Then, figure out how much money you need to cover your wants comfortably.
Freedom means being able to cover your luxuries, too, so let’s plan for it.
2. Build your safety net
For everyone, financial freedom means having enough cash on hand to deal with the unexpected.
Once you can see your current spending, you can make the right changes. You’ll quickly see where you can trim fat.
That might mean ditching a couple of subscription services you don’t need, scaling back on late-night pizza orders, or cutting back on online shopping.
With the changes you make, start building an emergency account. Generally three months of basic expenses is a good emergency account.
Calculate how much you want to set aside and then make a timeline to reach it..
When you’ve hit your emergency goal, keep saving into a savings or retirement account to make your money grow.
3. Define what financial freedom means to you
What does financial freedom mean to you?
For some, it may mean cutting all major expenses, selling valuables, and moving to a low-rent area working only a few hours a week. For many, it means working a steady job and building savings to retire at 70.
The two important pieces are that you know how much money you need to be happy and making a plan to get there.
4. Reach for the sky
Once you’ve made your definition, it’s time to invest in resources to get there.
If you’re taking the traditional route of rising through your industry, look at other successful people and try to copy their success. Ask professionals for advice. Take community college courses. Put in as many hours as you can and ask for feedback.
You may want to change industries, which may mean setbacks. Make some budget cuts to speed up your savings to build a small nest egg to help with the transition.
5. Share your success
Nobody is an island and nobody becomes successful without help. A community is only as strong as its most impacted people.
When you do reach financial freedom or success—whatever that means to you—give back. Try to help people less fortunate than yourselves get what you got, learn what you learned.
And it’s never too early to start.
Progress may be slow, but if you start now by next July you can be somewhere.
Varo (Varo Money) is not responsible for the content, accessibility or availability of linked sites.
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Writer Bio
Kacie Goff
Kacie Goff has over five years of experience writing personal finance content for a wide range of audiences. She's always loved taking complex concepts and distilling them down so they're more accessible to others. As she creates content, she aims to educate and engage, helping people discover that successfully managing their money can be easier than they ever imagined. Over the last five years, she’s also covered personal and commercial insurance, home design, health and wellness, and more for publications including Bankrate, Freshome, The Simple Dollar, and websites of a broad variety of businesses. Her brand is Jot Content (jotcontent.com).