(Don’t forget to get your tickets to the PIMD Real Estate Conference coming in late September. I hope to meet many of you in person and in the mastermind groups at the event. You can also stay home and enjoy the conference virtually.)
(Today’s guest post comes to you from Miley, the Tech Blog Girl, who can usually be found blogging at DailyCupOfTech.com.)
Technology has revolutionized how we bank and handle finances. For many savvy savers and struggling spenders, financial freedom is the ultimate goal. Fortunately, living in the digital era has the potential to improve financial literacy and awareness.
If your life goal is to achieve financial freedom, read on to discover the important steps you must take to make your dream a reality.
Reflect and Set Goals
Before you try something new, reflect upon your existing behaviors and habits. Take some time to understand what you’re doing well and what you should improve. Then, identify areas you’re struggling with and whether there are any trends in your behavior to correct.
For example, you may see an issue with your credit score. What factors contribute to that? Do you continuously miss payments? Why?
Understanding your inner workings will help you set relevant improvement goals to move you closer to financial freedom. You can use apps to analyze your patterns and build awareness about your spending and saving habits. Apps like Mint and You Need a Budget (YNAB) allow you to track and categorize your expenditures. Sometimes just seeing where your money is going is enough to inspire a change.
Pay Down Existing Debts
Debt has become an expected part of daily life for many consumers. While carrying some strategic debt can be beneficial (building equity with a mortgage, for example), general consumer debt is a point of contention.
Start your journey to financial freedom by paying down existing debts. You can use a small side hustle or make money on your phone doing online surveys to contribute to your efforts. You can also use a debt payment strategy to help you prioritize.
The debt snowball is a strategy for people with several debt streams. You start by paying down the smallest debt until that debt is gone, then using the payment you previously made on that debt to tackle the next largest debt until they are all gone. The quick results of paying off the first small debt helps establish smart financial habits and a sense of success, playing on psychology to help you achieve your goals.
The debt avalanche is another method of identifying the order of which debt to pay off your debts as you tackle them one at a time. In this method you start with the debt having the highest interest rate and work your way down to the one with the lowest interest rate last. Cutting the higher interest rate debts first can lead to a slightly earlier debt free date and a slightly lower amount of total interest paid.
The Debt Manager app uses the snowball method and helps track your progress. Tally is another app that automates debt payments so you don’t miss due dates.
(Editor: If you need more help with tackling your debt, check out my best-selling book, The Doctors Guide to Eliminating Debt.)
Start an Emergency Savings Fund
Another important step in achieving financial independence is to start an emergency savings fund. There’s some controversy about whether you should prioritize debt payments or savings. While it varies from situation to situation, you’ll ideally strive toward both.
It’s better to start saving a nominal amount of money while paying down debts— even $20 per month— than to set this task on the back burner. Saving money now creates the habit and turns it into an expected behavior. It also presents the opportunity to start gaining interest.
If your debt is so high that it’s unmanageable, paying it down should be the priority. If you’re in this situation, connect with a financial advisor to help you create a sustainable action plan. In the digital era, you can connect with a reputable advisor from anywhere and use centralized software to share information.
Start a Retirement Plan
Saving for retirement is another essential component in the journey to financial freedom. Many aspiring retirees use apps like Wealthsimple to consult with a Robo advisor and build an IRA for retirement. Acorns is another fantastic investing app that rounds up your purchases to the nearest dollar, then invests the small amounts to start generating interest.
The importance of creating a retirement plan and investing for the future cannot be understated. Starting soon with a small contribution will help you maximize your compound interest earning potential.
Practice Minimalism and Delayed Gratification
Many aspects of achieving financial independence are tangible. They pertain to clear steps and what you should do. It’s the “how” that can be a challenge.
Accomplishing these goals often requires a mindset and behavior change. It means spending less money and embracing the idea of delayed gratification. One of the pitfalls of the digital age is how simple it is to order what you want when you want it. Amazon charges your credit card and delivers the goods with the click of a button.
Create an environment that removes the immediacy from your purchasing experience. Unsubscribe from marketing email lists to minimize your exposure to advertisements. When you find a product you like, enforce a 30-day delay on buying it (unless it’s a need). Finally, consider your goals and reflect upon how this purchase will affect your progress.
Using apps like Digit can help you visualize your goals and get reminders of your progress. Having a visual progress chart is a powerful tool for staying on track.
Explore Your Passions
Starting a supplementary income stream by pursuing one of your passions can also help your bottom line. If you enjoy creating art, running, coding, singing, or dancing— brainstorm ways to turn that passion into income.
Many people are incorporating side hustles into their plans for achieving financial freedom. One of the most common mistakes in this effort is chasing the money, rather than chasing the passion. You may see someone else making money doing something, and try that rather than tapping into your skills and enthusiasm. You’re more likely to find success and stick with your efforts if you’re engaging in an activity that brings you joy.
With digital technology, creating a side hustle is easier than ever. Tap into online platforms like Etsy and Upwork to share your skills while building an audience on social media. While the idea of overnight success isn’t real, this exercise is an excellent way to make progress.
Connect with a Community
Connect with others who share your experiences and goals. Follow like-minded people on social media and engage in online conversations to discuss the challenges you face and how you overcome them. The digital world promises constant connectivity; use it to connect with others on the same path as you.
The digital landscape offers endless potential for achieving financial freedom. Keep these key steps in mind as you pursue this worthwhile goal.