This week on the podcast, we discussed what financial freedom means to us.
Financial freedom can mean a variety of different things to different people, like being able to retire early, being able to quit your job to pursue your passions for a living, or being able to volunteer your time as you please without having to worry about how much (or how little) it pays.
No matter what financial freedom means to you, there are some basic steps that apply toward everyone’s journey to reach financial freedom. Here are our 3 recommended steps to take toward financial freedom.
#1 Pay Off Debt
This is the step that myself and many of my friends are currently working on. We may not know what life has in store for us or exactly what we want for financial freedom, but we know getting out of debt is the first step to get there.
Paying off debt is hard but it’s necessary for any definition of financial freedom that you are working toward.
Figure out what you owe, who you owe it to, and make a plan to get your debt paid off. This is easier said than done, but if you start defining your dreams, it will be easier to stay motivated to pay off debt.
#2 Define Your Dreams
Determine what you really want in life. What does financial freedom and early retirement mean to you? For a lot of people, financial freedom means having the ability to live your dream life. If you have a passion, your financial situation can be keeping you away from finding any fulfillment from it.
I know that personally, my dream is to travel and explore new things with my family and do creative projects and work that makes me feel fulfilled. I don’t want to be tied down to work for the next 40+ years and stuck in the paycheck to paycheck cycle. I know it sounds simple, but my dream is to have enough time to live my life by my own terms and do what matter most to me.
You may not realize it, but time is a privilege and one of our most important assets. Money can’t buy more time butit can allow you to free up the time that is available to you, and that’s why I’d like to become financially free. Gaining a clear understanding of your dreams and your end goal in life will help you stay driven and motivated to your goal of reaching financial freedom. Maintaining sight of your dreams will help you progress even during the toughest times.
#3 Align Spending Habits with Your Values
One of the best steps I took for my finances last year was to align my spending with my values. It sounds simple on the surface, but a lot of people don’t take the time to check if they’re spending on the things that make them happy.
Unfortunately, many people are caught in the paycheck-to-paycheck cycle, or keeping up with the Joneses, which means their spending probably isn’t reflecting what they truly value. That spells disaster for any financial plan.
Instead, take a moment to list out everything you value in life. For me, it’s family (including pets), friends, travel, new adventures, and health (including personal care). I try my best to limit my discretionary spending to these categories, which helps me say “no” to the things that don’t matter, and “yes” to the things that do.
This provides a great frame of reference for your spending habits, and it allows you to spend without feeling guilty, while effortlessly cutting your spending in all the areas that don’t matter.
It’s critical to gain control over your spending in order to save for retirement, but nailing this down early means you’ll have to save less (and will spend less in retirement), which puts financial freedom closer in reach.
Where are you at on your journey toward financial freedom?