6 Steps to Achieving Financial Freedom and Ditch the 9-5
Introduction to Erin and the steps towards financial freedom.
I met Erin Edwards as part of my new life blogging. She and I are in many of the same blogging groups, and she’s impressed me with her talent, skills, and growth! As the creator of Level Up Personal Finance, her goal is to help women find confidence, clarity, and success at every level of their financial journey.
Grab all you can from her article, written especially for the readers of the FreeAt50 blog as you plan how to escape the 9-5!
Questions then answers: Let's begin the discussion about financial freedom.
It always seems like the people who reach financial freedom are the ones who are born into a wealthy family, win the lottery, or found their way to a $400K salary.
But the internet is full of regular people reaching financial freedom.
- What exactly is financial freedom?
- What does it actually take to reach financial freedom?
- And can you, a regular person, actually reach that goal?
Read on for the answers to all of these questions and more!
What Is Financial Freedom?
When you’ve reached financial freedom, you have enough money to comfortably choose:
- what you want you want to do
- where you want to live, and
- how you want to work and live your day-to-day life.
For some people, this may mean reaching “FIRE,” or “financial independence, retire early.”
For others, this can simply mean having financial resources that allow you to escape the 9-5 and finding professional freedom in your career.
Instead of being stuck in your current path so you can afford your bills, a life with financial freedom allows you to make different choices without having to worry about your finances.
The end result?
Less stress, more free time, more quality time with friends and family, and the ability to start the project you’ve always dreamed of.
What Does It Take To Reach Financial Freedom?
It should come as no surprise that it takes serious planning and effort to reach financial freedom.
But with the right plan and dedication, you can achieve it!
Step 1: Define Your Goal
If you want to achieve financial freedom, the first big question you have to answer is, “What is your one big goal?”
Why do you want to achieve financial freedom?
Do you want to stop working in an office when you’re 50?
Do you want to step out of a traditional career and start your own business?
What kind of life do you want to have when you finally reach financial freedom?
How do you want to spend your days?
Who do you want to spend them with?
What is your motivation to reach financial freedom?
Think it, see it, and then write it all down- you can always come back to this list for motivation if you hit a rough patch on the path to financial freedom.
Step 2: Track Your Income and Spending
If you don’t know where your money is going, it’s hard to know where you are on the road to financial freedom.
Start by building a monthly budget so you can quantify exactly what your income and expenses are.
If you’re spending more than you would like, don’t be hard on yourself- use it as an opportunity to start making changes.
If you’ve never created a budget before, check out my Budgeting 101 guide here.
I highly recommend using Mint to track your income, expenses, and investments..
Step 3: Cut Your Expenses
- Now that you’re tracking your regular spending, can you find places to cut back?
- Are you using the streaming services you’re paying for, or can you cut back?
- Can you trade dinner out once a week for a home-cooked meal and save that money?
Despite what you’ve heard a million times, cutting back your daily Starbucks habit won’t make you a millionaire, but it will give you $5/day to pay down debt or invest.
Every little bit counts.
Step 4: Save for Your Future - But Only Save What You Need
Take a look at how much money you have in your savings account RIGHT NOW.
If something were to happen to your financial situation tomorrow, do you have enough money to keep you afloat for 3-6 months?
Do you have an emergency fund?
Grab your budget, add up the expenses you would still be paying if you were unable to work, and compare that to your savings.
If you have somewhere between 3 and 6 months covered in your emergency fund, you’re golden.
If not, take the time to set aside a little bit each month until you reach that goal.
If you set money aside for emergencies, you won’t have to worry when the rainy day hits, and your financially free self will thank you.
Just remember to be realistic about what your emergency expenses really look like.
If you don’t expect to need $50K for a 3-6 month emergency state, it’s not worth saving in a savings account that likely makes less than 1% in interest per year.
Step 5: Pay Down Your Debts
Once you’ve assessed your spending, saved for emergencies, and found a little extra room in your budget, it’s time to start paying more into your debt.
Remember that putting extra money into the smallest debt is a good motivator, but paying down the debt with the highest interest rate will save you more money in the long run.
If you are wavering between paying down debt or investing, I highly recommend reading “Should I Invest While Paying off Debt?” for a strategy to determine what’s right for your situation.
Step 6: Invest in Your Future
It is nearly impossible to reach financial freedom without some type of financial investment.
Investing works on one basic principle: let the money that you already have make you money.
For anyone aiming for financial freedom, this means two things:
1) Invest as early as possible. The sooner you start investing, the sooner your money can start making you money.
2) Educate yourself on investment options. There are endless ways to invest financially, and taking the time to learn is the key to your success. Always be on the lookout for resources that speak clearly and with evidence to backup their credibility- there is so much bad advice available, so be careful!
Can I Really Do This?
Yes, you can!
If you ever read stories of “regular people” who have found their financial freedom, you will see the same consistent steps to get there.
Find your “why” so you have something to reach for, assess your current situation, and then work to get out of debt and invest in yourself.
What’s your big goal? Why do you want to achieve financial freedom to ditch the 9-5?
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