8 Simple Steps to Financial Freedom

You can achieve financial freedom…as long as you want it and work hard for it. Unless you are part of the 1%, your journey on the road to financial freedom will be a long one. In this article, I want to walk you to through a few steps which I think are critical to any financial improvement effort. This road map pulls together information and ideas that I have learned by studying other financial plans, and reading books. It includes information that I learned on my own financial journey, and I hope that you will be able to use this as the starting point for your own.

financial roadmap

1. Set Your Mind to It

Improving your finances involves a lot of work and patience. You cannot turn things around and make things better overnight. So the first step is to recognize this and put all your attention and effort into doing something.

2. Set Up Goals and Milestones

Next, set up some rough financial goals. You won’t have it exactly correct the first time, but that’s okay. You can start with a wishlist of reasonable objectives for now and make them better later. Some of your goals may look something like this.

  • Start a budget
  • Lower my expenses by $100 a month in 3 months
  • Pay off my car loan by the end of the year
  • Start saving $50 a month
  • Do 3 things to better my finances each month

There is no correct way to do this. Just make a list of 3-5 things and you can just go from there.

3. Spend Less

Improving your finances is really as simple as the old cliche “spend less than you earn”. Once you can get your expenses and spending under control, everything else — e.g., paying down debt, building wealth, etc. — will be that much easier to accomplish. When it comes to improving your finances quickly, nothing beats cutting your expenses. To get going, here are plenty of ideas on how to cut expenses and save money.

4. Get Out of Debt

If you are in debt, the best thing you can do with the money you saved is to pay down your debt. Being in debt is like trying to win a race with one foot on the accelerator and another on the brake. Whether they are good debt or bad debt, they are costing you money and slowing you down.  As such, one of the early step toward achieving financial success is to get out of debt.

Here is a good primer on how to get out of debt.

5. Start an Emergency Fund and Have a Plan

Once you’re debt free (excluding your mortgage), it’s time to start building your wealth. But before you can do this, you need to have an emergency fund and a good emergency plan in place. This is your “Get Out Of Jail Free” card — always good to have one around. What you need to know about an emergency fund is covered extensively here: Do You Have a Fully Funded Emergency Fund?

6. Earn More

You can only take it so far with cutting expenses, so the next step is looking at ways to earn more money — especially by building alternative income streams, diversifying your income sources, and becoming less reliant on your job. To get you started, here are some ideas on how to make more money.

7. Save and Invest

After you get all the basic stuff out of the way, now it’s time to get serious and work toward your short-term and long-term goals. Here are several articles about saving and investing:

8. Protect Your Finances Against Risks

Uncertainties and risks are your biggest enemies. They can throw you off track and destroy your progress. However, there are many ways to mitigate these risks and prepare for uncertainties. To protect yourself and your family against catastrophe, here are 5 Essential Insurance Policies to Buy.

Obviously, there are much more to achieving financial success, but I believe these are the 8 most essential things to work on.

Photo by San Francisco Sun.



Author

By , on Sep 18, 2012
Pinyo Pinyo is the editor of Moolanomy Personal Finance and an entrepreneur with over 20 years of business experience. He combines his passion technology and finance to bring you informative personal finance articles to help you improve your finances.

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I'm just an average mom, trying to live a frugal life and get out of debt. I write about things that have (and haven't) worked to improve my family's financial situation. What works for me may or may not work for you, and you should always consult a financial advisor before making important financial decisions.

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