Have you ever wondered which habits can help you reach financial freedom? If you are reading this article, you are probably looking for some solutions. Paying off your debts and finding ideal solutions for your financial problems can be exhausting. It is hard to deal with financial problems, especially in this modern age where periodic economic crises often occur.
The main goal of this article is to help you become financially resistant to the strong impacts of an economic crisis. You have to accept the fact that crises will happen from time to time. Overall, this is how the modern economy works.
On the other hand, you shouldn’t accept a situation in which you don’t have enough money to cover some essential expenses, such as food and bills. If you often run out of money, that is a sign you are doing something wrong with your finances. In other words, you need to reach financial freedom.
What does the term financial freedom mean? In short, financial freedom is the ability to cover your living costs for at least six months without having a job or someone else to lend you money.
Therefore, if you want to reach financial independence, consider the following steps:
Plan Your Finances
What happens when you lose your job? It is a normal situation that can happen to everyone. When we have a job, a house, and a car, we think the whole world is ours! We spend a lot of money on luxury things and often live beyond our means. On the other hand, losing a job can turn our lives into a nightmare.
Having a job is not a good indicator of financial security. Therefore, if you lose your job, various problems can hit you and you need to find a way out of the situation. Firstly, take some time to learn how to cope with the job loss. Secondly, determine how to cover upcoming living expenses.
Last but not least, make a strategy. If you want to have stable finances in the long run, you need to create a strategy and implement it step-by-step.
Start an Emergency Fund
We live in a world where financial risks are all around us! This is why you should put some money aside and invest it in an emergency fund. As we said earlier, your path towards financial security should be implemented step-by-step. Therefore, when you start an emergency fund, don’t put all of your money into it. If you choose to invest $1,000, that will be a great start!
This amount of money can cover only small financial risks. On the other hand, there are a lot of benefits of creating the emergency fund. You finally realize the importance of financial independence and you are ready to invest even more money in the fund!
Get Rid of Your Debts
How to increase funds in an emergency fund? The answer is simple – get rid of your debts! Living beyond your means is the worst possible thing to do. However, there are easy ways to pay off your debts. For instance, start paying off your tiny bills first such as phone bills, small bills, etc. Always keep a record of your expenses and try to get rid of unnecessary ones!
Next, don’t buy things you can’t afford. A new house, car, or the latest version of the iPhone can wait a bit. When you become financially independent, you will be able to enjoy these things.
Plan your Retirement
It is always recommended to think about your retirement. Some people avoid thinking about this aspect of life. Like now, when you get older, you will need money to pay rent, buy food, and so on. Therefore, some percentage of your income should be invested in your retirement.
According to Dave Ramsey who wrote the best-selling book “Total Money Makeover“, 15% of your income should be equally allocated to several funds such as income funds, equity funds, aggressive funds, and international funds.