Five Steps to Financial Freedom

five steps to financial freedom
source: Naypong at
  1. The Single Best Investment is in Yourself.

The first step to financial freedom is maximizing your earning potential.  You are your most important investment, so get as much education as you can to prepare you for your career. Go to the best college you can, and don’t stop being a student when you graduate. There is always more to learn. Make it your goal to read a book every month, study a new language, or master a new skill on the computer. You never know what might help you land your dream job, impress a client, or get you a promotion.

  1. Avoid the Debt Trap.

There are only four financially intelligent times to take on debt: starting a business, buying a car, buying a home, and getting an education. All of these can be considered investments in your future wealth. Some would argue that you should never take on debt to purchase a car, but others consider a car an investment in your future. Unless you live in an urban area with ample public transportation, you need a reliable car to get to work. If your car is always breaking down and making you late to work, you are not maximizing your earning potential. Credit card debt is what you really need to avoid. Credit card companies charge outrageously high interest rates, and the only investment you are making is in their bottom line.

  1. Simple is the New Rich.

One of the forgotten keys to financial freedom is learning how to live well within your means. Organization is essential. Create a filing system for bills and other important documents. Make a calendar or set reminders to let you know when bills are due.  Establish a budget for yourself and stick to it. Be disciplined with your money and don’t fall victim to impulse purchases. Cash is your tool for investing in yourself and your future. Look for higher quality items that are going to last a long time.

  1. Achieve Financial Literacy.

You can’t expect to achieve freedom without knowledge. Learn to speak the language of finance. While the world of finance seems to get more complex every year, it has also never been easier to access information. So, instead of watching a morning talk show, turn on CNBC. Read the money section of the newspaper or subscribe to the Wall Street Journal. Buy at least one personal finance book each year (and read it). Find a great personal finance blogger to follow. If you have never taken a finance class, look into taking one at a local university or online. Some universities make courses available to the public through iTunes U. Several times a year there are free university finance courses available for free on Coursera. There are so many great resources out there now, so find one that works best for you.

  1. Retirement Planning Starts Before 30.

Far too many people today reach retirement age only to find they cannot afford to retire. Financial freedom is making the right choices today so that you can enjoy the future. Learn a lesson from the older generation and take control of your own retirement. Do not depend upon social security or a company pension that may or may not actually be available when you reach retirement age. Invest in your own 401(k) or IRA, and start now. The earlier you start investing in your retirement account, the longer you have for the compounding effect of interest to work for you. Starting early and maximizing your annual contribution are the keys to financial freedom in retirement.