8 steps to achieve financial freedom
I love to help others create a plan for their money, achieve goals, and change their lives. It is an awesome feeling which is a big part of why I am a Budget Coach. But what if you are not quite ready for a budget coach? Well, this post is for you! This is the same step by step process for creating a budget that I use for my clients with a bit more so that you can really take the steps to achieve financial freedom. Check out each post listed for the full details 😊
1. Find your purpose by making a plan
Creating a budget and sticking to it is no easy feat! After years of really struggling to stay on budget between months of really productively saving, I realized what was missing most of the time…purpose. During the times that we paid off 30,000 in debt, saved for a big trip, or saved up so that we could go down to a 1 income family, we had a big goal and an even bigger reward! I know that seems really simple, but the reward has to be just right or you won’t stay as motivated to continue with your big goal. That is why I created the financial inspiration worksheets. They will help you gain clarity on your goals, what you want and when you want it. You will gain clarity on what your financial future could look like if you start being a wise money manager today and help you work through the steps to achieve financial freedom! This is always the first step that I get my Budget Coaching clients to do.
When you subscribe for my newsletter, you can get these sheets for free. Be sure to do this as it is the first step when it comes to creating a budget and setting big money goals.
2. Write out your debt
In order to write out a budget you need to know everything you are working with. This is the time to write out all of your debts and your bills that you pay on a monthly basis. Writing out your debt may be a bit of a reality check if you have been avoiding this number for a while. Try not to be too discouraged by the number if this is the case.
3. Track your money
Everything needs to be tracked. I highly recommend using pen and paper for the first couple of months to really get use to it, but there are apps like Mint and You Need A Budget that can help too! The majority of my clients say that pen and paper tracking helps them stay on track with their budget though. Continue reading more about tracking your expenses in my post about through this process step by step here.
4. Create your budget
Once you have spent a month tracking all of your expenses, go ahead and add everything up, then create a budget for the next month. This way, you will have a very good idea of what to expect with your income and expenses and it will be a more realistic budget.
What if you don’t have enough money left over at the end of the month? You will need to find a way to make the budget balance. Check out this post to get some ideas.
5. Aim for savings first
Hear me out, I know you are probably thinking that you need to pay off your debt first, but actually you need to have an emergency fund. Without an emergency fund, the first unexpected expense to come along will wipe out all of your budgeting progress. The emergency fund is meant to help you avoid this and prepare for the unexpected.
Paying off your debt is one of the most important steps to achieve financial freedom. By paying off your debt you will have more money left over to save and to invest to grow your wealth. I highly recommend tackling one debt at a time and paying just minimums on the rest. Once that debt is paid off, then you roll over the payment onto your next debt down the line. I walk through this process step by step here, so go and check that out!
7. Friendly tip! Prepare for expenses
The envelope system has a long history. Decades ago, women would take a portion of the income and place it into an envelope for groceries and the like. This tradition has grown into a well known system for planning for normal expenses because it works so well. As you have probably guessed, I am a fan and a long time user of the envelope system. So, what are you waiting for? Read this article in order to learn how to set up the envelope system for your own family and start being prepared today for expenses.
8. Invest and Save
These 2 key activities will be your big steps to achieve financial freedom. Saving for big expenses such as a home purchase, a car purchase or fun trips should not be a problem after paying off your debt. Ideally, the money you used monthly to pay off debt would then be rolled into a savings account once your final payment was made. Be sure to keep a larger emergency fund saved up for those big life events, so about 6 months worth of income. Then it is time to grow your wealth by investing it and just sit back and watch it grow! I am a huge fan of learning how to invest from the experts (via books, online articles, even money shows on t.v.) and people who are doing it well. Michelle from Making Sense of Cents is a finance blogger that will really dive deep into the stuff we all need to know. Check out her blog and especially this post about dividend growth investing.
Finding financial freedom doesn’t have to sound like some fairytale that will never happen to you. Anyone can achieve their goals as long as you put in the hard work and the sacrifice that comes along with it. Just take the steps to achieve financial freedom one at a time starting with finding your reasons for creating a better future. Writing out your debt, tracking your expenses, and creating a budget will help you gain clarity on how to make your dreams a reality. Then paying off debt and saving will help you prepare for that dream to come true. Taken step by step, it hopefully won’t feel so overwhelming. And remember, this is a lifelong process, not a sprint to the finish.
If you are feeling overwhelmed by the thought of creating a budget on your own, please check out my Budget Coaching where I will help you go through the steps to get your finances on the right track!