Financial Freedom: Step-By-Step Stages for Goal Setting

I definitely dream of financial freedom. I would love to just have so much money that I don’t have to think about money ever again. Of course, that’s not going to be realistic for most of us. However, we can start small and then go step-by-step to increase how close we can get to financial freedom. A recent Forbes article laid out the 8 levels of financial freedom, which provide a good guide for setting personal finance goals.

Start By Earning More Than You Need

If you’re living paycheck to paycheck then the first step is to get out of that rut. Cut back drastically on spending. Do all that you can to increase income. If you can’t save money then you definitely can’t ever reach financial freedom.

Save Enough Money to Take a Work Break

Most people want financial freedom because they don’t want to work so much. When you’re in that paycheck-to-paycheck phase, it feels like you’ll never be able to stop working. Therefore, the next step is try to save enough money to give yourself a small taste of that life.

For example, create a savings account that will allow you to take a sabbatical from work. Even if you decide not to take it, having the money in that account will make you immediately feel like you have so much more financial freedom. Personally, I love my work, but when I feel like I have to do it just to get by then I start to resent it. That savings helps a lot.

Work Towards Small Luxuries and Extra Savings

Once you have enough in savings that you feel like you can breathe, it’s time to start thinking about your daily life. Financial freedom means that you’re able to buy the things that you want. Of course, I don’t think it’s useful to just splurge on a lot of unnecessary spending. However, I do think it’s good to recognize what small little luxuries will make your daily life better. The goal at this stage is to balance your income and spending so that you get to enjoy those luxuries regularly while still setting aside savings from every paycheck.

Financial Freedom: Money or Time

The Forbes article says that “freedom of time” is the next level. I actually think this is super important. I consider it to be one of the first steps, prioritizing it over a work sabbatical or those small luxuries. However, everyone has different needs and desires when it comes to financial freedom. For me, freedom of time means that even though I work a lot, I’m able to do so on my schedule. I’m also able to be location-independent. Those things make me feel like I have the freedom that I want.

Plan for Retirement

Once you are living comfortably, it’s definitely time to think about setting aside money for retirement. After all, that’s when you’re really going to need financial freedom. Forbes breaks this down into two levels. First, save enough for a decent basic retirement. Then, once you’ve achieved that, start saving for the type of retirement that you really want to have.

Of course, life happens, and we can’t always work through these steps in a linear fashion. Nevertheless, they provide a great guideline for some basic goal setting with financial freedom in mind.

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Money Tips for Millennials

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Millennials and Money

Millennials follow a different path than generations before them, in more ways than one. This group is reaching milestones later in life, such as getting married and starting families, and focusing on life experiences more. We’ve been given all the job advice in the world growing up; the thought that all you need to do is work hard to make it big. However, someone along the way forgot to give more tips on money, especially given the difficulty of finding a job, especially in their field of study, for many millennials.

Although unemployment rates have been decreasing in recent years, millennials still make up roughly 40% of the unemployed in the United States, according to this Newsweek article. This fact can make it difficult for this generation to get ahead, but the good news is there are ways to leverage your finances even if you feel you are working a dead-end job.

Here are four money tips for millennials that I’ve used to help my own finances:

Make saving a social thing. 

I don’t know about you, but I can think of at least five friends off the top of my head who have yet to get that raise at work. While we all love hanging out together, sometimes that involves extra spending that we really should not be doing. But, a way to spend just as much time together without emptying your bank account is to take turns hosting a girls’ night in. Buying some cheap wine and snacks accompanied by some movies and laughter is a great alternative for a night on the town, which can be $81 per night on average.

Also, the crew can ban together to do money-free weekends together. Even if you are not physically hanging out, you can still help to keep one another accountable. Plus, it’s great to have an excuse to bond with friends, especially over common goals.

Create other streams of income. 

If you recognize that you are in a dead-end job, hopefully you are taking steps to get out in order to improve your financial situation. If you are having a difficult time finding a new job (another post for another day), another option would be to create some other sources of revenue as you continue the search.

Seasonal jobs are a great option for millennials as they are often a bit more flexible, but you can also offer to use some skills or talents you currently have to gain some extra income. House cleaning, babysitting and the like are all great ways to make cash fast, but you can also consider freelancing, especially if you want to land that dream job.

Get techy with it. 

Investing seems so unattainable and intimidating before you actually start doing it, not to mention it can also be risky. But, it is a great way to grow your wealth. There are so many online tools you can use now to improve your financial portfolio without the intimidation. These resources cost very little to get started and are great for millennials. The best part is many of them allow you to create your own minimum investment amount, giving you more control over than ever.

Be smart with your options. 

In desperate times, you may be tempted to apply for a payday loan or sign up for another credit card to pay off other expenses; however, by doing so, you are only creating more debt for yourself. These quick options may be easy to get, but they dig your hold even deeper. Don’t get caught up in these fast solutions to solve all your problems; instead develop a strategic and specific plan that will get you out of debt and get you ahead. This plan may include automating a monthly savings amount, consolidating current debt, starting a retirement fund, and cutting back on leisurely spending.

This is another reason why having an emergency savings fund is so important; it will keep you away from wanting to (or needing to) resort to these choices. Avoid accumulating credit card debt and instead work on building your assets and net worth.


 

Millennials definitely have had to face many challenges economically that may not have been expected or predicted by previous generations. By spending some time being careful about your finances, though, you can slowly but surely build a reliable and steady financial future for yourself.

These are just a few ways I’ve focused on improving my finances. What have you done that works for you?

 

 

 

 

Does More Time or More Money Cause Happiness?

Does more money cause happiness?

Does more money cause happiness?

They say money can’t buy happiness, but research over the years shows that those better off financially do tend to have a better well-being…to an extent. Everything has a limit, of course, but if money does not cause us to be happier what does?

Those who are able to pay bills on time and not struggle financially do appear to be happier in general terms, but money being the cause to happiness seems to actually be more about what we buy, according to some research. It is suggested in recent studies that what we spend our money on does determine our happiness, and that actually, spending money on experiences has a longer lasting effect. Although, this is a thought that could have been assumed even without the study.

Conversely, a popular study by Daniel Kahneman and Angus Deaton expresses that a higher income does improve your life but not necessarily your emotional well-being. It goes on to say that those with an annual income of $75,000 seem to have the best of both worlds (looking fondly on their life and associating quality with everyday experiences).

There is a point where money begins to no longer provide your well-being and seemingly starts to cause more heartache due to losing satisfaction or desiring more, which becomes a never-ending cycle with needing more money in order to satisfy your urges or new financial demands. Of course, this does also partially depend upon what is important to us as individuals in life and our desires. Is it money that really makes us happier? Or would more of something else solve all our problems?

A study published in the Social Psychological and Personality Science journal found some interesting data to this question.  The researchers at UCLA and Wharton School involved in this latest article (published May 25) found that roughly two-thirds of 4,400 people surveyed mentioned that they would prefer having more money over time. However, the one-third who chose more time were happier. This does come with gray areas, though, and raises a couple important questions.

Are people who want more time truly happier? Is it that not desiring more money makes them more content or is that they already have enough money so now they want more time to enjoy their income?

The researchers did use the $75,000 salary amount to evaluate questions such as these. When asking which was preferred, more time or money, to individuals with this base income, those who answered more time did appear to still have more happiness in their lives on average.

So, which is better? Time or money? Does one cause more happiness than the other? While still up for debate, it appears better to be in a situation where you have enough money to take care of all your needs and obligations in life while wanting more time rather than the other way around. Although, if you have minimal to no debt, money may be of little concern and, thus, more time may be better in those particular situations as experiences in life tend to fulfill us more, according to the study mentioned previously in this article.

There is definitely a difference between needing more money to better your financial situation and wanting more money for superficial reasons. At the end of the day, only you can determine what makes you happy. It’s all about creating balance, both with time and money.

What are your thoughts on the topic?