We all aspire for financial freedom. Money is a critical aspect of our lives. Over a third of American investors define financial success as being debt free. It is also defined as the ability to save money for long term goals like education and retirement.
Financial hardships have a negative impart on our lives. Lack of money creates stress, anxiety and disagreements in our lives. In fact, it ruins marriages, tears families apart and keeps people from achieving their dreams. We all need to have money to live.
How to achieve a financial breakthrough
Achieving financial freedom involves taking several steps. You must change your financial habits, make good decisions about the resources you have and live positively. Regardless of your income or age it is critical to have a personal financial plan. The steps below can be a guide for regaining control of your finances and creating a better financial future.
Develop a Budget
Creating a budget is important for many reasons. First, a written monthly budget lays the foundations for all other steps you will need to take. Second, it helps you to differentiate between your wants and your needs. Third, it enables you to spot problem areas and straighten them out. Lastly, it gives you a peace of mind.
- Know your net income
You must determine the amount of money you receive. However, be careful because it’s easy to overestimate. Develop your budget based on your net income not your gross income. Your net income is your take home pay after deducting social security, taxes, 401(k), etc.
- Track your spending
Categorize and track your spending. This allows you to know where to make adjustments. In fact, you are better able to pinpoint how most of your money is spent, and where you can easily make cut backs.
- Set your financial goals
Write down the short and long term financial goals you want to accomplish. Short term goals are the goals you want to achieve within a year. Long term goals take many years to accomplish like your children’s education, and saving for retirement. Involve everyone in you household, even the children if they are old enough.
- Develop a plan
Using the expenses, fixed and variable, you complied earlier will help you estimate your expenditure in the coming months. The fixed expenses will enable you to make a fairly accurate predict ion of what you need to budget for. Your past spending expenses will enable you to estimate your variable expenses. Remember to include an emergency fund and check your insurance plans.
- Adjust your expenses if necessary
To complete your budget make the necessary adjustments. After writing down your income and expenses, you can pinpoint where there is a surplus or where you need to cut back, and direct the money to achieve other more important goals.
- Review your budget
To achieve your financial goals it’s important to regularly review your budget. Few items in your budget are cast in stone. You may have reached a goal and want to set a new one, your expenses may rise, or you may get a pay raise. To stay on track, it’s important to keep checking in.
Pay yourself first
This is the time to plan for your future. Whatever your future goals this is the time to start. Monthly, set aside a percentage of your salary, even if its 1%, to pay yourself first. Use the money to invest in your future. You can put the money in a wealth building fund, house fund, and retirement fund savings account.
Repay your debts
Settling your debts is an essential step to achieving financial freedom. Also, debt will keep increasing if you don’t seriously work to repay it. You wouldn’t feel free until your debts are repaid. Moreover, it feels awesome to have no student loan payments, no credit card payments, and no car just right loan payments staking out your life.
Appreciating what you have is the shortest path to freedom. Have gratitude for the gifts you have by donating your time. Spend some time with the less privileged or the elderly in your city. Help to make the world a better; contribute to the life of someone.
Being disciplined will enable you to identify which possessions aren’t adding values to your life. In fact, we may get out of debt faster by selling a lot of the unnecessary stuff we have. Remember, at times it’s better to temporary deprive ourselves of superficial satisfactions in order to move in a better direction.
To achieve financial success you need to develop a budget. It helps you to control your finances and achieve your financial goals. Also, you need to pay yourself first. This means investing in your future. Paying your debts is equally important because unpaid debt will keep growing and become a financial burden. Learn to appreciate the good in life and help to make the world a better; contribute to the life of someone. Lastly, have discipline. Change your habits, focus on getting rid of debt, clear the clutter and debris from your life, and making better decisions with the resources we have.
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