How to Achieve Financial Freedom
Financial freedom. These two words can cause some major angst.
After all, who needs another reminder of the unattainable? With every scroll through Instagram, you witness people living their best lives. And maybe you’re left wondering how you’ll ever be able to pay for the life you’re living right now—much less the worry-free, Instagram-approved, easygoing financial existence you dream of.
Well, friends, we’re here to turn your head (and your heart!) back toward the dream of financial independence. We want you to find freedom from your past by paying off debt and to look forward to your future by building wealth.
Believe it or not, the key to finding financial freedom is simple: Keep a monthly budget.
The Opposite of Financial Freedom
When it comes to vetting the lifestyles of the rich and famous, social media only tells us half the story. The expensive cars, huge homes, and seldom-repeated outfits may very well be purchased through careless spending and the swipe of a credit card.
Studies help us gain a sense of reality about the financial stability of our neighbors:
- 78% of U.S. workers live paycheck to paycheck.¹
- Nearly 3 in 4 workers say they are in debt.²
- Almost half of U.S. households carry credit card debt with an average balance of $15,654.³
Maybe some of these statistics ring true for you too. If so, you know what it’s like to always run out of money, regardless of how much you’re bringing in.
That’s because financial bondage doesn’t discriminate based on income. In fact, researchers found that one in 10 workers earning $100,000 or more live paycheck to paycheck.⁴ It’s no wonder that on average, 40% of Americans feel they have too much debt.⁵
Do these numbers have you feeling all the feelings? Pause for a moment and take a deep breath. It helps to acknowledge where you’re at today. Mark this as your starting place and get ready to run in a different direction toward financial freedom.
How to Break the Cycle of Living Paycheck to Paycheck
Let’s call it like it is, shall we? The ability to take the first step toward financial freedom—and all the steps that come after—is up to you. It’s not up to your boss, a lottery ticket, your spouse, or your kids.
You’re the only one who can make decisions about how you’ll spend the money you earn (and earn the money you spend!) moving forward. Yes, it helps to have your spouse and your family on board. But you have to start with the one person you can control: yourself.
In order to get where you want to go, you’ll need a strategy. Let’s break it down into steps:
- Make a plan.
- Monitor the plan.
- Evaluate your plan and make adjustments.
- Rinse and repeat.
Study after study show that if we want to reach a big goal we should be intentional about tracking progress. Writing everything down really packs a punch.⁶ Researchers call this approach monitoring; we call it making a budget.
Makes sense, right? By putting together a plan for your money and checking in regularly, you’re bound to find all kinds of dollars floating around ready to be put to better use.
The monthly budget is a powerful tool. Just ask one of the four million (and counting!) budgeters who’ve signed up for EveryDollar. Each one is working toward their own definition of financial freedom.
You Can Reach Financial Freedom Through Budgeting
Let’s talk about what we mean by a monthly budget. You can find a complete guide on our website. In the meantime, we’ll cover the basics:
- Create your budget before the next month begins.
- Include all income and all expenses.
- Give every dollar a name.
- Move things around until your income minus your expenses equals zero.
- Track your spending as the month goes along.
When you budget this way, you have the opportunity to prioritize what’s most important. If you’re not sure what you should be focusing on, take a moment to determine where you are in the Baby Steps. Maybe you’d like to pay off debt, build an emergency fund, or save for an upcoming vacation or a new home.
Friendly tip: Create your budget in EveryDollar and we’ll do most of the work for you. Our app and desktop version comes with suggested categories and the opportunity to customize the budget according to your specific goals and needs.
Budgeting Changes EVERYTHING!
You can experience the benefits of budgeting—and get a taste for the financial freedom budgeting brings—long before you’re living the life of your dreams.
In fact, as we see it, budgeting produces financial freedom through three distinct phases. Here they are with tips on how to master each one:
Phase One: Take control of your finances.
That’s right. Financial freedom starts when you do.
- With a budget you tell your money what to do instead of wondering where it went.
- A budget gives you a starting point for money talks with your spouse and goal-setting for the months, years and decades ahead.
- A budget helps you prioritize your spending appropriately.
Phase Two: Track your spending and stay the course.
Create and maintain a monthly budget, and you can’t help but accomplish great things.
- A budget enables you to find money you didn’t know you had. Seriously. You can put that money toward things you actually care about like giving, saving or paying down debt.
- Because the budget takes big picture goals and breaks them down into monthly increments, you’ll slowly but surely—or quickly and defiantly!—cross big items off your financial bucket list.
- The longer you budget, the more you’ll love budgeting. It takes most users about three months to get the logistics down. After that, you can count on momentum to keep you moving.
Phase Three: Commit to budgeting for the long haul.
Make budgeting a lifestyle instead of a quick fix, and you’ll never look back.
- A budget offers peace of mind no matter your circumstances. When tragedy strikes, you can focus on people instead of paperwork.
- The monthly budget, practiced year after year, opens you up to give generously whenever a need arises.
- Managing your money well with a budget prepares you to go wherever and do whatever you want. Limit, meet sky.