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The Foundations of Financial Freedom

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Striving for financial freedom is a worthwhile goal. However, it can be easier said than done. You'll need to be dedicated, disciplined and educated to achieve financial freedom. With the correct road map, you’ll be well on your way to achieving your financial goals. Here are foundational steps to get you started.

Set the Stage

Before you begin, it’s essential to set your financial goals, which will require you to consider your priorities carefully. Ask yourself the following questions:
  • What does financial freedom mean to you?
  • What would you do with your time if you didn’t have to stress about bills or unexpected expenses?
  • With the previous two answers in mind, how do you picture your ideal life in 5, 10 and 20 years?
To most people, financial freedom means peace of mind and taking control of their lives. However, this is your life, and you can decide what it means for you.

Next, it’s time to track your spending. No matter your life goals, you need to have a clear picture of where you are today. Look at your banking records to see exactly where your money goes each month. You might find surprises in your credit card statements, such as subscriptions you forgot to cancel or overspending on takeout food. Track this information in a spreadsheet to help with the next step.

Now that you have a grip on your spending, budgeting is essential. Think of this as the roadmap to your financial success in the future. Ask yourself, where can I trim unnecessary expenses? Those unneeded subscriptions are a great place to start. Consider eating out less frequently and cooking at home more often. This frees you up to save more money for your long-term goals (which is what financial freedom is all about).

Invest Wisely

You’ll need to learn the basics of investing to achieve financial freedom. A great financial adviser can help you, but it’s crucial to understand what’s happening to your money. First, do your research. There are several ways to invest your money, and each will work slightly differently. For example, you should educate yourself on the following:
  • Stocks – When you purchase a stock, you buy partial ownership of a publicly traded company.
  • Bonds – Typically issued by governments and corporations, you are lending them money when you buy a bond.
  • Mutual funds – Like stocks and bonds, you pool your money with others to buy together.
  • Certificates of deposit – Issued by credit unions and other financial institutions, certificates are like a savings account and earn you fixed interest over time.
  • Employer-sponsored retirement plans – These vary by plan and could be a 401(k), IRA, SEP or 403(b), among others.
Each investment option works toward a similar goal: giving you a chance to grow your money over time. However, each investment carries a different level of risk. Researching and understanding your risk tolerance is vital. For example, the stocks you purchase may rise or fall in value depending on what’s happening in the larger economy. This means you can make or lose the money you invested. However, certificates of deposit are a safe option, allowing you to earn fixed interest over a period of time. Balancing risk and safety generally provides a balanced portfolio, along with the guidance of an experienced financial professional.

Remember that investing is a long-term solution that takes time to see results. Your budgeting and spending habits today will set you up for future success, allowing you to invest your money wisely.

Consider Professional Advice

While understanding the basics of investing is essential, it’s also a good idea to seek out expert advice. Personal finance experts have their eye on the economy every single day. While you work, tend to family and tackle your to-do list, it’s their job to know what’s happening to your investments. A financial adviser can help you develop a strategy and provide advice tailored to your needs. They can help you figure out how to pay off debt, budget for your goals and achieve financial freedom.

Last, various financial calculators will help you, especially if you’re new to budgeting and investing. Whether you’re calculating a mortgage loan, debt consolidation or future savings, there’s a resource that can help you.

Take the first step to achieving financial freedom by budgeting and saving today! With dedication, discipline and education, you can use the resources available to you to take control of your future. Contact Power Financial Credit Union to learn how they can help you achieve your goals.