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I’ve been a financial professional for almost two decades, and you’d be surprised at how many different things the words financial freedom mean to different people. I’ve heard everything from winning the lottery, to saving enough for a comfortable retirement, to just having enough money in the bank to cover the cost of an unexpected car repair without wondering how you’re going to make it the rest of the month. I propose that what financial freedom really means to most people is that you’ve finally achieved control over your money, rather than letting your money dictate your life. So how do you get there? Here’s what I’ve learned over the years.
Financial freedom doesn’t happen on its own. Financial freedom is achieved by setting a series of goals you’d like to reach in your lifetime, working out a plan on how to achieve them, and putting your plan into play. Your goals should be specific and include a timeline. For example, “I’d like to own a house” is an admirable goal, but “I’d like to own a house five years from now” gives your goal some specificity and allows you to set up some reasonable milestones on your journey.
When I say “live below your means,” I’m not talking about making your current life miserable for the sake of your future, but many people have some wiggle room in their finances where a small lifestyle adjustment can create a decent source of savings. That’s where making a budget comes in. Writing down all your monthly expenditures will give you a starting point to find positive changes you can make. To me, living below your means ultimately translates to not spending extra money just because you have it.
This is one of my favorite tips, because it’s one that has become very easy with recent innovations in online banking and electronic payments. Automating your bills and savings essentially takes the decision making out of your hands. You can move a regular, set amount of money into your savings account, and ensure your credit score stays in a good range by scheduling your regular monthly payments. The best part of automatically moving money into your savings is you can easily transfer the money back to checking in the event of a financial emergency, so you’re only committing to your savings plan—you’re not locking the money up somewhere you can’t get it.
One of your first goals should be to get an emergency fund going. An emergency fund is savings you’ve set aside that allows you to expect the unexpected, whether it’s car repairs, dental work, or covering rent if you’re between jobs. Rule of thumb is to aim towards three to six months of expenses—I know that sounds like a lot, but that’s just the end goal. Working towards even $300 or $500 dollars in your emergency fund can give you a healthy buffer against an expense you weren’t expecting.
I don’t know anyone without some level of debt, myself included. However, it’s how you approach your debt that that make a big difference. First, you should write down all your current debt, along with the annual interest rate. For some people it makes sense to put more towards the high interest debt first, as it will cost you more in the long term. But, if you’re the type of person that gets motivated by crossing things off your list, you might consider paying down the smaller debts first. The sense of accomplishment you get from finally getting something off the books can feel great—and help spur you towards paying off the other debt faster.
Make AnnualCreditReport.com one of your favorite websites. You’re allowed to request a free credit report every 12 months from each of the three major credit bureaus—Equifax, Experian, and TransUnion. Not only can you double check to make sure there hasn’t been any fraudulent accounts opened up using your personal information, you can keep track of how your score changes as you work towards your financial goals. Watching your credit score grow is immensely satisfying, and a high credit score opens up a lot of money-saving doors for your future.
With the right mix of savings and investments, one day you might be able to make work a choice, rather than a necessity. Establish a balanced portfolio of investments in stocks, bonds, and/or mutual funds, and build savings in the form of IRA, certificate, or money market accounts. Smart investors never put all their investment eggs in the same basket; they spread their money out across different types of investments. The way in which you mix and match your investments among stocks, bonds and other options is called asset allocation, and holds the key to helping you reach your goals. For more information about asset allocation, talk to a financial professional.
Many employers offer 401(k) retirement plans that automatically deduct a certain amount from each paycheck, and then invest that money in a mixed portfolio. Even better, a lot of employers will offer a contribution matching up to a certain percentage of what you put in every paycheck. That’s free money for investment that you don’t want to leave lying on the table.
Call me biased, but in my experience hiring a financial professional to build a comprehensive financial plan is one of the most important steps toward financial freedom someone can take. I've met a lot of people who think they can go it alone. While this strategy is an option, it often results in missed opportunities. Financial professionals like myself can help you understand the nuances of the financial world and make the decisions that will genuinely help you achieve your life goals—for greatest control over your money and future.
Financial freedom means the opportunity to make choices about how you want to live, rather than having choices dictated for you. It’s important to remember that financial freedom looks a little bit different for everyone—we all have different goals and timelines. But no matter what financial freedom looks like for you, it can be achieved with some careful forethought, planning, and a willingness to set goals. So, what are you waiting for? Grab some paper and a pencil, and let’s set some goals!
Ready to get started on your way to financial freedom? My team of experienced financial professionals would be happy to discuss your dreams and goals with you in a complimentary consultation. Send us a note and we’ll be in touch!
Representatives are registered, securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, D/B/A Alaska USA Financial Planning & Investment Services, which is not an affiliate of the credit union. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc. is a registered broker/dealer in all fifty States of the United States of America. #FR-3660224.1-0721-0823 Exp. 08/06/2023
As a financial professional for more than 15 years, Mike Klopfer helps individuals, families, and businesses plan for their future by providing them with the experience and knowledge necessary to achieve their goals.
He is an alumnus of the University of Colorado in Boulder and has earned the highest credential in the financial planning field the CERTIFIED FINANCIAL PLANNER™, (CFP®) professional certification.
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