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As we are approaching the Easter season and finalizing our spring breaks, it's worth noting your current progress towards your personal or family's freedom and independence financially.
Reaching financial freedom is a nice idea for many. Others it is a reality. As Ric Edelman says, author of The Truth About Retirement Plans and IRAs, "So, if you want a financially secure and comfortable retirement, it's up to you to create it." And fortunately, with the ever evolving technology platform handing out tools and resources for us, we really shouldn't have any excuses.
These 5 steps outlined below are not all-inclusive but are a great way to jump start your season.
1. Build Your Emergency Fund
Nobody can predict the future and something always comes up that is going to hit you for money. According to Kiplinger's Personal Finance, several of these reasons are enough proof to stash some savings until you can reach at least 3 months of your income: loss of job, emergency dental/health visits, auto & home repairs, sudden death in family, and travel.
2. Knock Out that Credit Card Debt
In my book, Smart Strategies to Financial Freedom, I outline in Chapter 1 to "Know your debts" because this is the start to moving towards freedom. Most people have no clue how much interest is being charged on their cards to include having no knowledge, whatsoever, about daily compounding interest. Credit card debt is one of the top killers from growing your wealth. Sounds obvious...you can't invest or save what you don't have or what you've already spent.
What steps have you taken to pay off debt quickly?
Share your tips and recommendations with us below.
3. Pay Off Consumer Loans
Similar to credit cards, consumer loans consist of loans such as home equity lines, automobile loans, student loans, etc. I've ranked this as number three because credit cards must be priority as the interest is compounded every day while consumer loans are compounded monthly (once a month).
4. Save from 10-20% of Income
Through college financial courses and supervisors alike, I am always reminded to "Pay Yourself". As a standard rule, you should always strive to take out 10% minimum of your paychecks and put towards a retirement account, i.e. 401(k), 403(b), or IRA. If you are able to knock out #2 & #3 above, then increase your savings slowly to 20%.
5. Live Below Your Means
As promotions are given, tax returns deposited, or passive income has been received, we almost immediately spend that money. I hear time-and-time again, live within your means. Unfortunately, rarely does anybody do that. In fact, we consistently live above our means, hence the credit card debts. So I am preaching to live on less than you make. Once you are capable of this feat, then it becomes far easier to pay off debt, save for retirement, and reach financial freedom faster than expected.
With tracking your debt and savings progress, one useful tool that I have discovered is an app from Personal Capital. It features state-of-the -art encryption by Qualys SSL Labs obtains a stronger rating of protection than most major banks or brokerages. They offer innovative tools and registered financial advisors, individuals can schedule a consultation should they chose in order to determine which wealth strategy best fits his or her lifestyle and what level of risk to take. If one is worried about fees, they have been recommended as having lower fees than traditional brokers.