Simple Steps to Financial Freedom

You may have heard that money doesn't buy happiness, and the person that told you that probably had a lot of money, but they aren't exactly wrong. I think what's closer to the truth is having money's not everything, not having it is. Kanye West said that. And while I don't always take financial advice from rappers, Kanye's got a pretty good point.

When you don't have money, it becomes the source of a lot of pain, frustration, and anger. It consumes your life and becomes the lens with which you see the world. "Hey, how much did that cost?" "Oh, that must've been expensive." "Hey, I think you owe me 20 bucks. You can... you can pay me later. That's... Venmo?" When we don't have it, every problem seems to revolve around money.

And while being rich won't fix every problem in your life, stacking up some money seems like a worthwhile pursuit. When you become financially free, you will no longer make every decision solely based on money. You don't take the job just because it pays better, you don't have to look at the price of organic groceries to make sure you can afford them, hell, you can take Uber Black to the airport ...every once in a while. Imagine being at a place where you never had to worry about money again. And maybe not even that far, imagine a place where money wasn't the major stressor in your life and on your relationships.

The steps to get there are simple, but it's not gonna happen overnight. So let's get started.

Step one: create an emergency fund. Save a thousand dollars and put it into an emergency fund that you'll only use in dire circumstances. I remember reading a story from Dave Ramsey from someone who literally put their emergency fund inside a frame with the words "break glass in case of emergency."

Hold up though. Emergencies don't include beer money, vacations, or even an engagement ring. It's a... it's a minimalist ring. This money should only be used if, and when, shit hits the fan. When your car breaks down, when you need to replace your water heater, basically when your life would otherwise become completely derailed, that's when you go to the emergency fund.

Why create an emergency fund? Because everything that can go wrong will go wrong, and instead of borrowing money from your family again, or pulling out your credit card, pushing yourself further into debt, you'll have something to fall back on. The great thing about the emergency fund is that it starts to give you that feeling of financial freedom. For the first time maybe in your adult life, you have some room to breathe. This step is the quickest way to finally start to gain some control back in your life.

Step two: pay off your debt. About 80% of American adults are in debt and we've just accepted this as the status quo. Maybe we bought shit we didn't need to furnish an apartment we couldn't afford, or purchased a new car when we could've bought used.

For me, one of the biggest problems with debt is that it restricts your monthly income. So when you're paying five to seven hundred dollars, even more, on your mortgage, student loans, your car payment, it severely restricts the amount of money you can save. The other thing I'll say is that you're gonna be saving thousands of dollars in interest if you're able to pay off your loans quicker.

Forget about cutting back on your daily lattes; this is where you're going to take the biggest step toward financial freedom. Let's consider a scenario: you have a hundred thousand dollars in student loans at a 5 percent interest for a twenty-year term. If you only pay the minimum for the entire period, you'll end up giving the bank over a hundred and fifty-eight thousand dollars. This feels like an emergency, so what's the best way to pay off your debt early?

There are a couple of approaches you can take. One option is to tackle the high-interest loans first. Each loan has a different amount and interest rate, so by focusing on the highest interest rate first and then moving on to the others, you can make the most financially savvy decision. Another strategy is known as "The Debt Snowball," which takes into account human behavior. By starting with the smallest loan, you can pay it off quickly, building momentum and motivation to tackle the remaining loans.

When I got serious about paying off my debt early, I created a spreadsheet where I logged in regularly to visualize my progress. I would delete loans one by one, fueling my determination to become debt-free. This gave me hope and a sense of a brighter future, where I could eventually pay off all my debts.

Next, it's essential to start a retirement fund. Saving for retirement is often put off, but by making short-term sacrifices, you can secure a dignified retirement. Compound interest is a powerful tool. For example, if you invest $10,000 in a 401k with a 10 percent annual return at the age of twenty and never touch that money until you turn seventy, you could have over 1.1 million dollars in the bank. Use online compound interest calculators to see how your yearly savings can accumulate over time.

When it comes to investing, consider your age, income, desired retirement amount, and risk tolerance. Research and choose the investment strategy that aligns with your circumstances. It's crucial to diversify your investments and have a long-term perspective. Don't stress over short-term market fluctuations.

Once you have a solid emergency fund, paid off your debt, established a runway, and started your retirement fund, you're on your way to financial freedom. Remember that having money isn't everything. Finally, if you're in a situation where every expense matters, please prioritize your own financial well-being.

We hope you found this article informative and engaging.