6 Easy Ways to Become Financially Free
- Avoid Poor Financial Management
The importance of proper financial management is overlooked by many; the results can be destructive in terms of strained marital relationships and meeting the needs of the family. The problem is frivolous spending and accumulating debt that is hard to repay, which can ultimately lead to bankruptcy.
You have probably heard before that one of the first things to do in planning a good financial goal is to build an emergency fund to cover unexpected expenses such as medical expenses, a car breakdown, etc. If you don’t have an emergency fund, it can result in building up a large credit card debt, limiting your retirement savings.
I recently read an article that a family of two was having trouble making ends meet and their family income was over five hundred thousand dollars. So, not necessarily how much a person earns determines their financial future; it is how well they manage the money they earn. In the case of the couple who earned over five hundred thousand a year, they were obviously living above their means. That brings us to the second point on how to become financially free:
- Live Below Your Means
There are a number of reasons why people have no money to save, but one that stands out is living above their means. Living below your means is actually a simple concept. It means spending less than you earn and saving the rest for investment. The reverse of that is living from paycheck to paycheck. The cause could be buying a more expensive car than you need or living in a house that is too expensive. A lack of knowledge of financial management can result in making the wrong financial moves controlled by impulses rather than sound decisions.
There is a misconception about living below your means. It does not mean you must save every penny you can and deprive yourself of everything you desire. A better plan is to save some and spend some to enjoy your life as you go along. Being frugal is a good way to manage your money, but if it goes too far, it becomes cheap, and it can harm your health and a better way of life.
There are plenty of good books written on personal finances and growing wealth. Find one and read it. I have a section in my book, “A New You in 90 Days,” that I believe could be helpful to you. It can help you face the truth about your direction and teach you some ways to turn your life around.
- Cutting wasteful spending
The difference between how most wealthy people spend their money and how poor people spend theirs is that wealthy people buy assets that appreciate and poor people buy junk that winds up in garage sales. The secret is buying things that you need and use rather than things that don’t improve the quality of your life. It is for each person to decide if spending their money on things like cable TV, going out for meals often, or other things that they would not miss and instead saving that money. It is easy to spend money on things that do not improve your quality of life one bit. Take an inventory of how you are spending your money and determine ways to cut back.
- Refinance your home
Wait until finance is at least one percent below your current interest rate before refinancing. This can save you thousands of dollars a year.
- Be wise in buying a home or a new car
Buy what you can afford not what the Bank allows when buying a home. Buy good used late-model cars, save a ton of money, and drive your car longer. Most cars are built to last at least three hundred thousand miles or more.
- Pay yourself a portion of your income first and invest it wisely
Paying bills is important, but it is more important to pay yourself first. Don’t you think you deserve some of what you work hard to earn? Put it in a separate account and invest it monthly.