The path to financial freedom
What is financial freedom? Well, as you may have heard from one of our advisers in the past, the answer to every good question is, it depends. It depends on how you define financial freedom.
Whilst this can mean different things to different people, the most common meaning of financial freedom, is being in a state where work is optional.
In our opinion, there is a second part to financial freedom which is being in a position to make good financial decisions, confidently. It is being conscious of the decisions you make day-to-day and how they impact your ability to achieve your long-term goals. We call this the ‘sleep test’.
We’ve put together a list of important factors to help you achieve your goals and get you on the path to financial freedom.
1. Clearly defined goals
How do we know we have achieved something without clearly defining what it is we are aiming for?
Well, the first step is to be really clear on what ‘financial freedom’ is for you.
Set your long-term goals clearly and then break them down into small, achievable chunks. This will help keep you motivated and will also help to feel like you are making good progress towards your long-term goals.
2. Cash flow management
An important part of setting and assessing how realistic your long-term objectives are, is gaining an understanding about how much it costs to live day-to-day.
To gain a better understanding of your cash flow and spending, we believe it is important to have a banking and cash flow structure that supports your efforts. In doing this, you will also gain more clarity about your financial situation, which will help you to make good financial decisions.
3. Protecting yourself
As you may know, life isn’t always smooth sailing and there may be a chance that you will experience a bump in the road along your journey. It is important to regularly review your personal protection (life insurance) and estate planning needs to make sure they are still current to your situation.
4. Strategy for debt repayment
There are a number of competing factors when it comes to achieving your various lifestyle and financial goals. One of the major competing factors is debt management and repayment.
An appropriate and personalised strategy for repaying and managing your debt, will ensure you either repay debt quicker or more effectively.
5. Monitor your progress and celebrate the wins
An important part of achieving your goals, is to track your progress and continually adjust your plan when appropriate.
As you go through different life stages, your circumstances (and goals) will change and it is important to review your financial structure to make sure it’s still the most appropriate.
6. Celebrate your wins!
Finally, it is important to acknowledge and celebrate your wins along the way.
If your goal is to repay your credit card, cut it up once you have paid it off to celebrate that you achieved a goal (this is extremely satisfying!). Or reward yourself with cooking your favourite, indulgent meal for dinner.
It is important to reflect and celebrate, because it will keep you motivated to progress towards achieving your long-term goals.
It’s a marathon, not a race!