By just doing a simple Google search, here are some of the many different definitions of Financial Freedom.
- It is the skills, knowledge and tools that help you make sound financial decisions.
- It is feeling confident and secure in your finances.
- It is being able to save every month while also enjoying splurges.
Although each of the above definitions are true, there is one definition that matters most - yours. You get to define with Financial Freedom looks like to you. Maybe it's being debt-free or saving enough to cover your child's education. Or maybe it's simply creating a budget and sticking to it. There are no wrong answers.
Follow our quick 3-step guide to find your own definition & path to Financial Freedom.
Step 1. Identify Your Goals
Without a goal in mind for your future, it's hard to create a plan for success. Look beyond what you are trying to accomplish in the now and plan for your future. Ask yourself these simple questions.
- Where do you see yourself in 5, 10 & 15 years? Are your current finances helping your goals or restricting them?
- When you think of success for yourself, how would you define it?
With the above answers in mind, identify what your ultimate goal is. This is your definition of Financial Freedom. To get you started, here are some of the most common definitions we see.
- Retire early at the age of 55
- Purchase a lake home to enjoy with grandkids
- Be completely debt free including mortgage
- Covering the cost of my child's tuition - in full
Step 2. Review Your Current Finances
Regardless if your ultimate goal is early retirement or being able to shop at a fancy grocery store each week without breaking the bank, you must review your current financial picture. This includes your budget, current debt and investment/savings accounts.
When you are thinking about budgeting, remember to keep it simple. We prefer a zero-based budgeting system to ensure every dollar has a home. With this method, even your savings is considered an expense. Use this simple calculation.
Need help getting started? Download our Budgeting Worksheet.
Create a place that stores all of your debt data including name & purpose of debt, interest rate, term & minimum monthly payment. With all of this data, you are now able to create a plan to best crush your debt. We recommend the Debt Snowball.
With the Debt Snowball method you first start with your lowest balance loan. When that loan is paid off in full, you then add the minimum monthly payment to your next debt item - giving you a bigger boost to pay off debt faster!
What are you saving for? Retirement? College? A new vehicle? To ensure you are preparing for the future, we recommend creating a plan with an Investment Advisor. That way you can create a plan that grows as you grow in your career & life. Most budgeting plans recommend at least putting 10 - 20% of your total income towards saving and investments. This also includes 401(k) contributions.
Step 3. Track. Measure. Adjust
Creating a plan to achieve Financial Freedom is not a one & done task. You'll need to continually check-in with your finances to make sure you're on track. Set small, but measurable goals to know you are moving forward.
Most importantly - know that life happens. It's okay if you need to adjust your goals - short & long term - to create a new personal definition of Financial Freedom. That's why your definition always matters most.
At City & County Credit Union, we're here to help with expert guidance to empower you to achieve the life you imagine for yourself. Meet with a financial expert to create a plan that works best for you & to better understand your current finances.