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What is financial freedom exactly? According to Dave Ramsey, “Financial freedom means that you get to make life decisions without being overly stressed about the financial impact because you are prepared. You control your finances instead of being controlled by them.” How do we achieve this though? Especially if you are already working full time and earning a salary? Before you start clearing your debt, Dave Ramsey advises that you save $1000 for emergencies, to avoid anything derailing your progress, which I think is a pretty clever tip.
1. Get out of debt as fast as possible.
Have you landed yourself in some hot water because of debt? It could be a student loan or maybe there was a time when you indulged in some items that you could not really afford. Or maybe there was an emergency and you had no choice but to get into debt. According to this report, the USA households are a total of $14.6 trillion in debt. So clearly if you have debt, you are not alone.
The real question now is, how do you get out of it. It can be a sticky situation, once you start accumulating debt, it can be very hard to get out.
Here are some tips to get yourself debt free. Write these down.
– Evaluate your debt honestly. How much are the repayments? How much is it in total. What are the interest rates? How many months do you have to pay it off?
– Set a Goal for a Deadline to start paying it off and when it should be completely paid off. Be realistic in this though, you still have to live in the meantime. Don’t be too hard on yourself, but be strict.
– Make Debt your number 1 priority. Don’t spend on unnecessary things while you have a debt to pay. Put all extra money towards clearing the debt. You can live for 6 months or a year without new gadgets and gizmos. This is really a gift you will be giving yourself. Forget about immediate gratification and think long term.
– Use the debt snowball technique. This is a super easy way to pay off debt and feel like you are accomplishing something.
Here’s what to do:
Write down all of your debts in order from the smallest to the biggest. Pick the smallest one and pay it off quickly. Now you take the money that you would normally use for that debt and pay it towards the second smallest debt. You still pay the minimum of each account, but you add the amount that you would have paid on the now paid off debt to the next one. And you carry on until that one is paid off. Then you add the amount that you would have paid for the first and second debt and add it to the third. Get it? Snowball the crap out of your debt. You can read more about the snowball effect here.
– Keep paying the minimum on all your debts except the one you are focussed on. This is very important, do not skip a payment for any debt, it will affect your credit score negatively.
– Automate payments and forget about them. This is also an easy way never to miss a payment. This step is just to help you be able to relax and know it is all sorted, you just have to focus on the one debt that is being snowballed.
– Use positive money affirmations to change your mindset towards money. Keep your head in the game. There are hundreds of affirmations all over the web. Here is a post with awesome affirmations to help you get on your way. Write one down every day, repeat them out loud. Be grateful for all that you have.
Once your debt has been paid off or reduced enough, the next step is:
2. Learn to Budget for financial freedom
Some people are great at budgeting, others suck at it. I am one of those people who are not great at budgeting. The truth of the matter is, you will never be financially stable if you don’t budget where your money must go every month. There are various ways to budget. A popular method is the cash envelope system. You can read more about that here.
If the cash envelope method doesn’t appeal to you, you can try using some apps like the ones mentioned in this post or online tools described in this article.
The most important thing to remember about budgeting is that you have to exercise some form of self-discipline. You are accountable to yourself. Tips to budget effectively:
– Write down your income and expenses.
– Allocate realistic amounts to every expenditure.
– Use the tools available.
– Try different techniques until you find the one that suits your lifestyle.
– Do not spend more than what you earn.
[/caption]I will be the first to admit that my budgeting skills need loads of improvement. I have started using an app to track my spending, but I have not really been paying attention to it that closely. If you are battling to stay within your budget, it’s time to think about:
3. Earning more money.
There are hundreds of posts and blogs just about this topic.
– The first thing you can do to earn some money is selling the stuff you no longer use or need. This will also help clear some clutter. Put it on eBay or your local buy and sell websites. Facebook has a marketplace where you can sell anything and reach loads of potential buyers without much effort.
– Start a side hustle.
Once again, the possibilities are endless. Here are some ways to start a side business without investing too much in the startup.
1. Become a freelance writer. Elna Cain explains exactly how to become a successful freelance writer in her blog. Her advice is all based on personal experience and she is amazing at teaching you all the tricks of the trade, like how to land your first client, where to find clients and how to set up a blog. Another blog I found extremely valuable is The Write Life in this post she gives extremely helpful tips on how to make money as a freelance writer. There are all kinds of writing up for grabs, if writing is a passion for you, give it a go. I wrote about the skills a freelance writer needs to be successful in this post.
2. Become an affiliate marketer. This is an easy way to earn a passive income if you have a blog. If you are interested in learning about becoming an affiliate marketer, read more about it here, including the steps I took to make my first affiliate sale. There are loads of products and companies who use affiliate marketers to market their services or products.
– Get a second job.
If you have the time, or you don’t have kids or dependents, it may be a good idea to get a second job. The possibilities are once again endless. If you have a car you could become an Uber driver. There are all kinds of jobs like a bartender, waitress etc. You can also look at online options like being a virtual assistant, a proofreader, a copywriter, freelance designer. If you have time, then this could very well help you on your way to financial freedom, at least until you are debt-free and have a nice savings amount stashed away.
– Ask for a raise at your current job.
This is probably the scariest thing to do for more money, apart from selling an organ. But you will never know until you try. The worst thing that can happen is that they can say no, right? So go ahead and ask. But before you ask, make sure that you add enough value to your organization. You don’t want to be the slacker demanding more money. If you are a valued employee, this request will probably get more serious consideration. If there is a promotion in the pipeline, then make sure you apply and get yourself noticed. You also have to hold yourself to some value, to get to a point of financial freedom, you can’t go limping on on a small salary forever.[/caption]
4. Saving is the only way to get financially free
Ah, the dreaded S word. Yes, I know, it is not very exciting to save your hard-earned money when it would be so much more fun to spend it on some luxury item or holiday. The truth is, you have to think long-term to become financially free. Instant gratification will get you nowhere. As I said at the start of this post, Dave Ramsey advises that you put $1000 away before you start the debt snowball. Once all your debt has been paid off, you then have a head start with savings of $1000. What you can do now is take the amount you would have paid towards debt and pay that into your savings account every month, until you have about 6 months’ worth of salary.
This is quite a long road, which will take some time, but in the end, you will thank yourself. You will have the money to do the things that make you happy and you will learn to change your mindset towards money. Use the money affirmations to keep a healthy, positive mindset towards your finances.