What does it take to have financial freedom? This is a financial position wherein you receive consistent income that’s enough to pay for your monthly needs. Take note that this is not just any other income. It has to be a secure and stable source that you can rely on for your monthly needs.
Setting this up requires serious planning and commitment. It’s not an overnight thing that you can accomplish. You have to be prepared to work on this for a long time. You should know the right habits that will lead you to that financial position.
But with everything that’s going on around us, the pandemic and recession, is it really possible to achieve this financial state?
Yes, it is! One study conducted during the coronavirus pandemic that revealed how the event pushed people to save more. As long as you are committed to what you have to do, you can accomplish it – no matter what’s going on around you.
How do you start reaching for financial freedom? You can begin by understanding the habits that you need to implement.
5 habits that will help you achieve financial freedom
There are several financial habits that will help you improve your financial position. But there are the 5 most important habits that will help you with financial freedom.
Have a “save first” attitude
Every time you earn something, big or small, save a portion of it. The amount doesn’t matter. Just make sure you put away a part of that. Those extra savings that you’ll get can improve your finances.
Keep in mind that you are only encouraged to save only a part of what you got. Maybe 50%? Or 25%? It’s up to you how much you want to save. Feel free to enjoy some of it because you deserve it. You need to celebrate these gifts – but you have to learn how to control yourself when you do.
Make your money work for you
Another thing that you can do to achieve financial freedom is to find a way to make money work for you. The best way to do this is to set up a passive stream of income. Maybe you have an extra room in your house that you can rent out. Use your savings to fix that up then let someone rent it every month. That space can give you extra income a month – and you don’t have to do anything more and it’ll keep on coming.
There are other ways to make your money work for you. Focus on setting up those that will give you cash flow each month.
Be careful with financial decisions
Having financial freedom also means you know how to make the right decisions. Ultimately, it’s not the amount that you earn that matters. It’s more of how you decide to use it. If you make it a habit to spend way below what you’re really earning, you’ll end up with a lot of extra money. This can be used to set up a passive source of income. Or you can use it to pay off your debts so you can stop paying the high-interest rates.
Being smart about your financial decisions is an important habit to learn. To be able to do that, you have to keep your budget plan updated. This is what you’ll need to consistently look at to make informed decisions about your finances.
Avoid unnecessary debts
If you want real financial freedom, you need to be careful with debt. You don’t have to stop using it. But you have to avoid using it unnecessarily. Make sure that if you decide to use debt, it’ll be for basic needs or to help you improve your financial position. For instance, buying a house will improve your net worth over time. The monthly payments you’re making will go to the equity of the house. Credit card purchases that you make should be for necessary expenses only. And make sure that you can afford to pay it in full by the end of the month.
Pay your credit cards in full
Now that “paying in full” is mentioned, this is another thing that will help you achieve financial freedom. Debt is powerful enough to keep you from achieving that. So if you really want to improve your finances, you have to try to pay your debts in full – specifically your credit card balance. It will help you avoid a lot of credit card problems in the future. The high credit card interest rates will quickly make your balance grow. This is why you should head off the finance charges by just paying the balance in full when the billing statement comes.
Why financial freedom should be your ultimate goal
If you’re wondering if financial freedom is really important – yes it is. There are 4 reasons why this will benefit you really well.
Debt can bring a huge amount of stress to your life. If you want to avoid the stress, you have to make sure you can fully control your debts. Make every debt count. That means if you have to borrow money, it should be done with a purpose. This will allow you to justify it. The difficulty in providing the payments will be worth it because you know that this debt helped you achieve something for your finances.
Of course, the best way to really keep debt from stressing you out is to keep the balance low. Unless you have paid off your debts, don’t borrow more.
Pursue your dream
Financial freedom can also help you pursue your dream. If your debt does not take a huge percent of your income, that will give you enough money to work on other goals. For instance, you can start saving up for business capital so you can be your own boss. Or you can work on saving for the down payment of your home. These are both dreams that we all want to achieve because these will take our finances to the next level.
Higher quality of living
This is another benefit of having financial freedom. You can enjoy a higher quality of life. If you want to upgrade your home because your family is growing, you’ll find the resources to do that. In case you want to go on a vacation, you won’t have to feel guilty about doing it.
Best of all, this financial state won’t make you feel stressed about earning enough money. You can take a break because you know that you have set up your income so it can meet your basic needs.
Crisis-proof your lifestyle
Finally, you can enjoy a crisis-proof lifestyle. That means if you have financial freedom, it doesn’t matter what goes on around you. You know your finances can take it and you can survive. Make sure you’re better than the 47% of Americans who said they have enough emergency funds to cover 3 months’ worth of expenses. After the pandemic and recession of 2020, we all know that this is not enough. Aim to have so much more so you can really say you’re ready for any crisis.