Unexpected expenses and accumulating debt can cripple anybody’s wallet. Ideally, you would be debt-free, earn enough for all your living expenses, secure a retirement fund, and have some cash left over for fun and treats in the meantime. In other words, you want to have enough money to not have to worry about money. These key strategies can help you get there.
Set a freedom target
Financial freedom can mean different things to different people. What goal are you personally hoping to achieve? What do you want to change about your financial circumstances? Be as specific as you can about your desires, what they’ll cost, and the time by which to achieve them.
First, figure out your target lifestyle. Say you want to relocate from cold Canada to warm Sydney, have a waterfront home, and have a woodworking shop in your yard and make surfboards. Great.
- How much money will that lifestyle cost to maintain on a monthly level?
- Will you earn a living with your surfboards or will it be just a hobby?
- How much will it cost you to move?
- How much would you need to have in savings to safely make that transition?
Next, set yourself a deadline.
- What age do you want to be when you move into your dream Sydney home?
- How old are you now?
- How many years do you have until your target scenario?
That’s the time in which you need to save up the necessary money.
Finally, separate your financial journey into milestones.
- How much do you need to make per year to make the goal happen?
- Is your current job enough for that or do you need to level up your career?
Write all this down and have that memo in a visible place: on top of your financial documents folder, stuck to a wall… anywhere you will see it regularly and remember what freedom means to you.
Hire a financial advisor
This is one of the most helpful investments you can make. Once you have accumulated a fair amount of assets, you should get some advice on how to take care of them.
Professional advisors such as Verus Accountants can help you with financial planning. You can get tailored advice both for your personal finances and for any business funds management you might need.
Go over your sources of income, your credit, savings, debts, and pension plan. You might also want to analyze your expenses patterns together. An outside perspective can help you spot risks and opportunities that you would miss on your own.
Take some time to review your knowledge of financial issues. Do you understand all of your bank’s legalese? Are you familiar with your local, regional, and state tax laws? Have they changed in recent years? Get up to date with everything.
You should also follow the financial news and keep track of how those trends affect you. This is especially important if you own a business. If you’re an investor, keep up with the stock market developments and adjust your portfolio.
Financial know-how will also empower you to recognize bad debt in your business and protect your company against scammers. Many frauds target individuals too, so do your best to reduce your vulnerability. Learn all the financial technicalities and loopholes that you can.
Automate backup funds
You need a savings fund and an emergencies fund. It would be great if you had them in separate accounts. Deposit a percentage of your earnings into them each month. How much you’ll be able to set aside will depend on your specific circumstances.
Generally speaking, it should be a sum that you safely won’t miss in your day-to-day expenses. Remember to update that number after any raises, promotions, demotions, position changes, etc.
To keep yourself disciplined, set up automatic withdrawals to these accounts. Ideally, the money should be transferred the same day you receive your salary. The best way to prevent yourself from wasting it is to not touch it until you have to.