How to Pursue Your Financial Freedom
Where are you financially? Are you on a path to achieve your life goals? We ask because July 1 is National Financial Freedom Day. It’s a great opportunity to assess your progress. It may even make sense to make July 1 your annual financial check-in day.
What is financial freedom?
While it looks different for different people, the basic idea is that you’ve achieved financial freedom when you have enough resources (including passive income) to avoid working, while still living the lifestyle you envision for yourself.
If you’re younger and in the throes of your career, this may seem far-fetched. But, many people eventually achieve it—think of those who have successful retirements.
In some cases, that’s the goal: a dream retirement. In other cases, people picture themselves stopping work earlier in life. What you want and your likelihood of achieving it depends on your circumstances and goals. How can you get started?
Outline Your Goals
The first step to pursuing financial freedom is deciding what that means for you. Most successful financial outcomes start with planning.
Are you happy working until a typical retirement age? Or, would you rather retire a little bit early? Or, try to opt out of the workforce at age 50? And when you aren’t working, where do you picture yourself living? What kind of lifestyle do you desire—and what would it cost? All these questions should be clarified as you start to think about achieving your financial freedom.
Once you know what you want, then you can start to see how much it costs—and what it may take to get there.
Catalogue Your Current Spending
As we said, planning comes first. And you can’t plan if you don’t know your current budget. If you haven’t already, you need to document how much money you take in every month and how much you spend—and where!
Once you have a deep understanding of that, it becomes a matter of determining if you’re on the path you want. If not, you’ll know what resources you have to make adjustments. There are several basic keys to consider: your debt, your savings plan, and doing more with the money you’ve saved.
Assess Your Debt
How much debt do you have, and at what rate? Addressing this is often the first step in pursuing financial freedom. If you have high-interest debt, it’s almost certainly holding you back. You may want to consider consolidating it or putting all your resources toward paying it off.
On the other hand, debt such as a fixed-rate mortgage or relatively low-interest student loans may not be as problematic. It may make sense to talk with a financial advisor about your situation and how you can arrange your debt so that you can also pursue your long-term financial goals.
Build Your Savings
You may dream of having enough savings to stop working. But the first step in achieving financial freedom is building your emergency savings. Do you have enough savings to overcome the expenses of a car accident or an unexpected dental problem? Having that amount of money easily available will give you peace of mind and the ability to think ahead.
Once that’s achieved, you should start to put money away for retirement and medium-term expenses, such as a home, a new car, or college tuition if you have children. Building these resources will also help you build your confidence. Consider using high-yield savings accounts, so that you maximize your money.
Put Your Money to Work
As your savings grow, you may be able to do even more with your money. For some, that may look like generating passive income from a real estate investment. For others, it may be investing in the stock market, or simply buying treasury bonds. Each situation is unique, but there are seldom scenarios where having all your money in a savings account makes sense long-term.
At this stage in your pursuit of financial freedom, it benefits you to consult with a professional. You want to be sure that you’re making prudent choices with your savings. A financial advisor can help guide you and suggest strategies that you may not have even realized were possible.
Remember: Habits Can Go a Long Way
As you pursue financial freedom, the first few steps may feel daunting, whether they involve just a few minor tweaks or some substantial changes.
But, every journey starts with a few steps. Habits are built over time—and they can become powerful. It may feel strange to start brewing coffee at home or to automate savings from your paycheck into a dedicated money market account or to put away more in your 401k. And these things may seem insignificant at first. But, as you get used to them, they will become natural.
Over time, the money saved or invested from your new habits will become something you’re proud of. And you’ll be grateful that you made the effort to build and align your habits with your long-term goals.
Conclusion: Talk with an Expert
At Old National Investments, we believe planning comes first. There’s power in having a clear outline of what you want and how you’ll get there. You’ll gain confidence by working with an expert.
Our financial advisors will sit down with you and listen. Then, we’ll help you figure out how to pursue your goals. Nothing is ever set in stone—we are responsive to you. As your financial circumstances (or goals) change, just check in with us and we can work together to adjust your plan, so that you’re confident you’re still choosing the right path for you.
Are you ready to talk with a financial professional? Connect with us today!
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. This communication is intended for informational purposes only and is not intended to be a substitute for specific individualized investment planning advice, as individual situations will vary. The information presented here should only be relied upon when coordinated with individual professional advice.
