For so many of us, the concept of financial freedom is a pretty alien one. Our society has engineered itself in a way where our identities are inexorably tied to our professions and “the grind” so the idea of finally having enough to live on comfortably without working yourself to the bone 70 hours a week seems almost anathema. However, for millions of people, it’s a genuine dream that could come true with the right amount of planning and legwork.
To that end, this guide outlines several legitimate actionable strategies that should hopefully empower you to finally take control of your financial health.
Assessing Your Financial Situation
The first step towards financial freedom is understanding your current financial situation. Conducting a thorough assessment first involves adding up all your assets (savings, investments, property) and subtracting your liabilities (debts, loans). This gives you a clear picture of your overall financial standing, your “net worth”, as it was.
Next, make a comprehensive list of all your debts, including credit cards, loans, and mortgages, noting the interest rates and minimum payments for each. Finally, go through your income and expenses to see where your money goes each month, identifying areas where you can cut back and redirect funds towards savings and debt repayment.
Effective Debt Management
Managing and reducing debt is, of course, crucial for financial freedom as debts often mean interest, which, over time, only leads to even more debt. Start by trying to negotiation the lowest interest rates and most favourable payment terms possible with your existing creditors. Don’t be afraid to phone somebody up and have a conversation either, as you’re unlikely to get this done over email. You should also consolidate your existing debts.
Consider taking out debt consolidation loans to combine multiple debts into a single, manageable payment with a lower interest rate that’s easily trackable and traceable. When setting up repayment, meanwhile, focus on the ones with the largest interest rates first, then start on the smallest ones so you can build up a snowball of momentum and start knocking those debts out of the park.
Increasing Income Streams and Saving!
Boost your income to help accelerate your journey to financial freedom. Look for higher-paid work and consider investing in new skills and qualifications; use existing skills and hobbies to start a new side hustle and, if you think you have the mind and the patience for it, consider investing in assets that generate income with little effort, such as rental properties, dividend-paying stocks, or peer-to-peer lending.
Finally, get into a routine of saving. Start by defining your savings goals and then create a realistic plan to achieve them. This plan will include regular contributions to a saving account (go for the highest interest one possible), which can be automated though most banking apps. You should also be taking advantage of everything from ISAs to pensions to maximise your saving potential. Because you can never have too much for your retirement!
