With over 30% of people reporting that stress about money has caused problems in their relationships, there are plenty of reasons to get your finances on track.
Money problems can cause health issues, increased debt, or even divorces. Thankfully there are just a few steps to financial freedom separating you from frustration and being at peace. If you’re looking for more financial freedom in your everyday life, follow these 9 tips to get what you’re looking for.
Step One: Assess Your Daily Spending
One of your first steps toward financial freedom comes when you’re able to fairly assess exactly how much money you have and how much money you need. If you’ve found yourself in debt or near the edge of your own personal affordability, it’s time to grab a pen and paper.
You need to be able to measure how much you’ve got coming in before you can talk about how much is going to go out. When you’ve got rent, loan payments, and family expenses to think about, a little organization goes a long way.
Your daily spending needs to be broken down in as granular a way as possible. You need to break down how much you’re spending on food, housing, and utilities on a daily basis. Once you know that breakdown, you can start to measure how much you need to or want to work.
If you keep your expenses low enough, you might be able to work a little less while still building up a strong savings account. Be sure you’ve got a number set aside to take care of any outstanding debts.
Step Two: Make a List of Priorities
You need to then prioritize who you’re paying every day. While food and shelter are musts, you might not need to buy a latte every single day. You could save it for the beginning and end of the week, one on Monday to get you excited and one on Friday to celebrate the fact that you made it.
Your priorities also need to entail the parties that you’re supposed to be paying back. If you owe people money, you need to be putting money away to pay them back as soon as possible. The longer you wait, the more interest you could end up owing them.
If you’ve loaned money from friends and relatives, you should pay them back ASAP. You shouldn’t compromise any of your relationships over money. Prioritize the people who you care about the most because they’ll get you through the good times and the bad.
Step Three: Start With Your Smallest Debts
Make a list of all of your outstanding debts. This might be an irritating or upsetting affair, but it’s important that you’re completely honest with yourself about your income when you’re managing your money. The smallest debts are the ones you should pay off first. The ones that have the highest interest should take precedence as well.
By paying off the smallest debts you have, you’ll feel motivated to keep on a steady path toward financial freedom. As you pay off each debt, you’ll build up more confidence and take the efforts to cut back that you need to pay off all of your debt.
When you focus on the debts that have the highest interest, you can avoid paying unnecessary interest or higher rates in the future. Once you’ve got all of the small debts taken care of, dealing with your highest interest loans should be your next priority.
If at all possible, consider refinancing your loans to perhaps make one low payment rather than several different payments of varying interest. Paying off these debts will help you reach your full potential, so don’t procrastinate another minute.
Step Four: Pay Back Friends and Relatives First
If you’ve borrowed money from friends, relatives, or loved ones, they should take precedence over your loan officers. Lending institutions are used to having to deal with people who struggle to pay them back. Your friends and family aren’t.
The easiest way to ruin a relationship with someone you love is by adding money to the mix. People will feel uncomfortable like they’re being taken advantage of, or like they’re being disrespected when you wait to pay them back. Put all of your worries on ice and everyone’s minds at ease and pay back that debt ASAP.
Your friends and relatives who’ve lent you money might start to get uptight and anxious. They might make sly comments under their breath if you show up in a new pair of trainers or with a cup from McDonald’s. You don’t need your every decision scrutinized. Give them their money as soon as possible.
Step Five: Pick Up Extra Work
Thanks to the gig economy, it’s never been easier to pick up a little extra work on the weekends or in the evenings if you work during the day. Picking up some extra work adds to your overall income which can lend you a lot more flexibility when it comes down to paying off your debts. That extra money could be just what you need to maintain a comfortable standard of living while paying debts.
If you work a job that has an hourly schedule, stay tuned to when people need a shift covered. If you’re the go-to person for picking up shifts, you might get more offers than you can even manage. You’ll be loved by management and adored by the people who you’ve allowed to take a day off.
If you have another talent for working on websites or taking photos, see what your boss might need in the way of that kind of work. If you have more than one thing you can contribute to your workplace, your boss will see you as more valuable than other employees might be. You’ll be given extra responsibilities and the extra pay to match.
Step Six: Know What Your Goal Is
You should have a clear idea of what your goal is with making all of this extra money. Having a goal is important to staying motivated. Do you want to be debt free at the end of the year? Do you want to have enough in your savings account to take a vacation to Europe? Are you saving up for a wedding that you want to make your partner happy?
Some people might be saving up for the down payment on a home. In cases like that, make sure you do all the research you need to do many months in advance. You might find that the market is shifting and that you don’t need as much for a down payment as you’d like.
You might also find that the market doesn’t provide what you’re looking for. For example, in cities like New York, it’s not always more economical to rent than to own. If you don’t mind moving every few years or anticipate you will anyway, you might only be able to afford a home that could take you 50 years to pay off.
Step Seven: Achieving a Lot of Short-Term Goals is Key
Don’t set goals that are out of reach. Setting goals that are unrealistic or too far out of reach will keep you from achieving them at the pace you want. Your best bet is to set a lot of small goals. This is the same tactic that people take when the achieve serious weight loss goals. Setting out to lose 30 kilos is a lot harder than setting your goal at 3 kilos every couple of weeks.
Financial freedom is the same way. Whether you measure it in the amount you have in your savings account or the lack of debt you have, you’ll need lots of short-term goals to get there. Take on each goal with the same dedicated sense of purpose.
Step Eight: Let Your Closest Friends Know
You should be open the with people in your life who are closest to you. It’s likely they’ll be able to empathize with your financial situation and adjust their expectations accordingly. If they’re truly kind, they’ll stop inviting you to expensive things or maybe offer to pay for you to go along with them.
When you’re open about your financial situation, you feel a sense of liberation that is hard for some people to understand. However, the worst part of being stressed out about financial restructuring is the shame or the sense of isolation you feel. None of your real friends would want you to feel this way, which is why it’s important to be honest.
Step Nine: Be Gracious and Kind
Joan Rivers famously said, “you see all the same people on the way down that you saw on the way up.” This should be your motto when you’re thinking about how you’re going to treat your newfound financial freedom. You shouldn’t ever be rude to anyone when you get the freedom you’re looking for. You might need their help a little way down the road.
The Steps To Financial Freedom Will Vary
Everyone will take a different path as they go through the steps to financial freedom. The common denominator will be focus and patience. Without those two qualities, you won’t be able to stay on track. If you need some additional motivation on your way to financial freedom, contact us for some extra tips.