Striving for financial freedom can seem overwhelming at times. It calls for meticulous planning and unwavering dedication. Your individual approach may be different based on your circumstances, here’s a general blueprint to help in your quest for financial freedom:
1. Set clear financial goalsÂ
Start by defining your financial objectives. Determine what financial freedom means to you and establish specific, measurable, achievable, relevant, and time-bound (SMART) goals. How much does will your financially abundant life cost you per month? List everything: food, rent / mortgage, bills, holidays, children, schooling (for your children), schooling (for you!) etc
2. Create a financial freedom budget
Develop a comprehensive budget that tracks your current income, expenses, and savings. This will help you understand your current financial situation and identify areas where you can cut back and save more.
3. Reduce debt
If you have any debt, prioritise paying off the highest interest debts first, such as credit cards and personal loans. Create a debt repayment plan and allocate extra funds towards reducing your outstanding balances. Consider strategies like the debt snowball or debt avalanche methods.
4. Build an emergency fund
Establish an emergency fund that covers 3-6 months’ worth of living expenses. This financial cushion will protect you from unexpected events or emergencies without derailing your progress towards financial freedom.
5. Increase your income & diversify
Seek ways to boost your income, such as negotiating a pay rise at work, pursuing a side hustle, or investing in income-generating assets. Increasing your earning potential will accelerate your journey towards financial freedom. Relying solely on a single income source can be risky. Explore opportunities to diversify your income by investing in property, starting a business, or investing in dividend-paying shares. Multiple streams of income can provide stability and increase your overall wealth.
6. Save and invest consistently
Set aside a portion of your income for savings and investments. Automate your savings by setting up automatic transfers (standing orders) to a separate savings or investment account each month. Explore different investment options based on your risk tolerance and long-term goals. If you haven’t opened an ISA (UK only) this current tax year, open one up and save into that to benefit from tax free gains.
7. Educate yourself about personal finance
Continuously learn about personal finance topics like investing, budgeting, taxes, and retirement planning. Read books, follow financial blogs, listen to podcasts, or attend seminars/webinars to expand your financial knowledge.
8. Minimise expenses and live frugally
Look for ways to cut unnecessary expenses and adopt a frugal lifestyle. Differentiate between needs and wants, and make conscious spending decisions. Reduce discretionary spending and avoid lifestyle inflation as your income grows.
9. Learn more about yourself
The better you know yourself (what you enjoy, what you’re good at and what you should delegate), the more laser focused you can be with the execution of your plan. Do personality profiling tests, read voraciously, get a life coach, get a mentor in your existing, or future industry. Do anything that will put yourself out of your comfort zone, so you can learn more about what you like and don’t like. Try Clifton Strengths Finder or the Enneagram
10. Plan for retirement
Save for retirement by contributing to pension schemes such as employer-sponsored plans (e.g., workplace pension) or personal pension schemes. Take advantage of any employer matching contributions and aim to maximise your retirement savings over time.
11. Monitor and adjust your plan
Regularly review your financial progress, reassess your goals, and make necessary adjustments. Stay disciplined and flexible, adapting your strategy as circumstances change.
