June 29, 2022
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When financial adviser Daniel Colvin outlines what financial freedom looks like and says that you can achieve it, it can sound like an impossible dream.
Colvin, of Fiat Wealth Management in Wayzata, Minnesota, says your idea of financial freedom might mean you will:
• No longer feel anxious and stressed about unexpected bills
• Enjoy a vacation without worrying about the cost
• Have dinner once a month at an upscale restaurant
• Spend more quality time with family, loved ones, and friends
• Leave a job that is unfulfilling to pursue your passion
Can he be serious? You can really achieve those goals?
He is indeed serious. He says you will have your own idea of what it means to be financially free and they might not be the same as he outlines, but whatever you imagine will provide you with a tangible target at which to aim. Those goals will provide you with the motivation to keep going.
What, then, does he propose you do to achieve your own roadmap toward success?
Here are the steps Colvin suggests you should take to get you along the road toward eventual financial freedom.
First, Colvin explains, you need to define what “enough” is. You then can create a plan that provides you with the means to do what you want to do and when you want to do it.
A major benefit of setting up a budget is that you will know how your money will be used. Your budget will work only if you plan how you will spend your money before you actually have it, however.
At the start of each month, map out carefully how your money will be used to cover your costs, to pay your debts, and to build up your savings. People who plan their budgets in this way will notice the difference immediately, he says. Rather than reacting to purchases and bills each month, you will adopt an approach to your finances that is proactive and confident.
You likely have heard the saying that freedom cannot exist without boundaries, says Juan Toran of Fiat Wealth Management. Use this phrase as a rule on how you should use your budget to manage your cash flow daily, weekly, and monthly, he suggests. When you assign each earned dollar to a specific purpose in your budget, you provide yourself with the freedom to spend your cash, knowing all your needs are met, he explains.
Whether they are in the form of credit card debt, student loans, or car payments your debts are the first items you should address in your monthly budget. Those interest payments alone can hold you back from attaining your financial goals for years. Over that time you will be paying others rather than yourself.
Debt can be destructive. Seeing it in your budget every month can overwhelm you if you are constructing a budget for the first time. There are strategies you can use, however, to cut down your debt effectively and quickly.
In your budget you will set out your expenses line by line. At the same time, you should remember to pay yourself, too. You can do so by moving some of your income into savings or an interest-bearing account every month. In that way you can start to build your personal wealth.
If it seems impossible to save every month, schedule a part of your income to automatically be paid into a separate savings account as soon as you receive it. Saving $100 a month will provide you with a $6,000 fund for emergencies after only five years. Once you set the transfer to savings on automatic you will not have to worry about it again.
The greatest lie you can tell yourself is that you will start saving when you are making more money, when your expenses are lower, or when your life starts to calm down, says Colvin. You can enter the excuse for yourself.
The truth is, however, that if you fail now to begin saving—even a small amount each month—you never will start to do so, he adds.