Retired Folks celebrating achieving financial freedom

Top 13 Habits to Reach Financial Freedom

Wondering what’s the fastest way to achieve financial freedom?  Are you looking to get financial freedom in 2022? Who doesn’t?

Achieving financial freedom is everyone’s goal. Everyone wants to live a life with enough savings, investments, and cash on hand to afford the lifestyle they want to have.

Unfortunately, achieving these goals isn’t a walk in the park especially with the increasing debts, financial emergencies, and other issues that are keeping people from achieving their financial freedom.

It gets better.

This article is going to dwell on what is financial freedom and the road to getting there.

So grab a cup of coffee and read on to set yourself on the right financial path.

13 Habits to Reach Financial Freedom

Even though reaching financial freedom isn’t an easy endeavor, there is a realistic approach that can help you manage your finances responsibly to achieve it.

Generally, all that is needed to achieve financial freedom is to cultivate good financial habits

Read on to learn the good financial habits to practice daily to reach financial freedom:

Set Specific Life Goals

Goal-setting is an important step to apply in all aspects of life. When it comes to achieving financial stability, there is no room for being vague in what you want to achieve.
People looking to reach financial freedom must set specific monetary goals. When you set specific goals, you attract specific actions or solutions to achieve them. Therefore, keep your financial goals specific, and measurable as well as realistic, timely and achievable.

To achieve this, determine how much money your bank account should hold at any given time, evaluate your lifestyle, and at what age you want to achieve financial freedom. 

Determine Your Current Financial Standing 

No matter the stage of life you are in whether you’re a student, planning to retire, or you pursuing other interests in life, and you want to achieve financial freedom, start by determining where you stand financially.

According to Johansen Anderson, one needs to do an honest assessment of their personal financial situation first to establish where they are and what they need to do to reach where they want to be in the next couple of years.

Put all your debts together, determine your expected income, and examine what’s eating your finances without your knowledge.

You could also seek help from a professional financial advisor as well. In fact, when working to reach financial freedom, it’s important to have a financial advisor.

Live Within Your Means

“The path to financial freedom isn’t rosy”, explains Jessica Chapman, a certified financial advisor, and business owner. “People looking to achieve financial freedom have to commit to living within their means.”, adds Chapman. In this case, you need to prioritize building a strong financial foundation of savings before you start spending money on investments. One thing that keeps people from achieving financial freedom is their beliefs about money. 

What’s your relationship with money? Do you believe that you and money can’t stay in the same house for a given period?

Instead of assuming financial stability isn’t made for you, recognize that you can also move from depending on paycheck to paycheck to a financially stable lifestyle.

But to reach there, you must ensure your current resources can cater to your current lifestyle and then minimize expenses.

When you start keeping your daily expenses lower than your income, you create room for saving for your future life.

Know The Difference Between Needs and Wants

Understand what you need and what you want. There is a very big difference there since not everything you spend money on is important to you.
Note that needs and wants differ from one person to another. For instance, one’s needs might be another person’s wants. However, you must draw the line between the two if you’re working to reach financial freedom.

Understanding the difference between the two can help you prioritize your expenditure and avoid spending money on unnecessary things.

Pick a pen and paper and write down your daily expenses. Tick items you can’t do without and leave out those you don’t need.

Have a Budget

Developing a budget is one of the top habits to reach financial freedom for financially stable people. They always have a daily, weekly, and monthly budget that helps them pay all their bills timely while keeping their savings on track.

Even though a budget can be restrictive, it’s a must-have tool for helping you to reach financial stability.

Knowing where your money comes from and where it goes a long way to helping you avoid unnecessary expenditure.

Understand How Much You Spend

How to achieve financial freedom starts by understanding how much money you spend and for what purposes. Sometimes you spend money on unnecessary things.
If you depend on paycheck to paycheck, saving your money for your future life can be difficult. 

Tacking your spending can help you determine exactly how much you can save at any given time.

Track your spending for like one month or two to find out where your money goes. Remember to track both hidden and unhidden expenses to ensure you’re 100% clear on how you’re spending your money.

Trim Your Budget

Once you have developed your budget and understood how much you spend per day, week or month, trim it as much as you can. 

After going through your budget carefully, you will realize that there are many more things to leave out than you can imagine.
You’re probably asking yourself ‘should I leave out my morning latte or remove gym membership from my budget?”

Here, people need to check beyond the small things and examine the whole budget to make important lifestyle adjustments to alter their current financial state.

Keep Track of Your Credit Score

Many people out there can’t access loans due to their bad credit scores.
Note that your credit score can determine whether you will get loans as well as the interest rate you will be offered.

Your credit score can also affect your car insurance, life insurance premiums, and more.

In some regions, employers check candidates’ credit scores before making hiring decisions.

Keep your credit score in check by settling your bills timely and minimizing debts.

Use Debit Cards Instead of Credit Cards

Credit cards= borrowed money.

Debit cards= earned money.

To put this into perspective so that you can understand it better when you shop with a credit card, you use borrowed money (money that you’ll repay based on the terms and conditions of the credit company). On the other hand, when you buy items using a debit card, you spend money you’ve worked for (earned money).

In the first scenario, you’re increasing debt thus why it’s recommended to use a debit card instead of a credit card when buying items.

Learn How to Negotiate 

Many people are afraid to negotiate when buying goods or services thinking that they may appear too cheap. This is perhaps one of the cultural beliefs among Americans that you have to overcome if you want to reach financial freedom.

Understandably, some businesses won’t be open for negotiation. However, small businesses tend to allow negotiation especially with their repeat customers or when buying items in bulk.

This is how to buy goods or services at discount.

Learn to Invest Extra Money

Once you have developed a reasonable budget, don’t spend the extra money on unnecessary expenses. Invest it. Some people would just deposit the extra money into their bank accounts. That won’t help you to attain financial freedom. Invest it to start earning some interest.

Maximize Your Means With Passive Income

Passive income enables you to maximize your means while keeping your workload in check.

There are several passive income ideas out there. You can pick several of them.

Keep reading to learn how you can start generating passive income:

Invest in real estate

Real estate is a $10.5 plus trillion industry. Many people are making millions in passive income through real estate as opposed to other investment opportunities.
Granted, there are many passive income ideas out there. Unfortunately, most of them require some significant skills for you to reap big money.

With real estate, all you need to do is to buy or build a property and rent it out.

You don’t have to be a professional to invest in real estate. You can also start small and expand your investment as you start earning money.

Minimize Eating Out

While working to reach your financial freedom, it’s easier to forget that even your meals can keep you from achieving your goals. To avoid this, you should start packing lunch to avoid eating out every day, especially when working far from home.

Apart from helping you save your finances packing lunch enables you to prepare tasty and healthy meals.

In fact, multiple studies have linked eating out in restaurants with risks of obesity.

Additional habits to attain financial freedom:

Pay Bills on Time

If possible, pay your bills before they are due. While late payment of bills can seem like stretching your paycheck, it’s just the same as robbing Mercy to pay Joan. You will be left thinking that you have too much money but have stress later when you have to pay the difference.

You can avoid this by paying your bills timely or before they are due. This will give you more control over your finances hence enabling you to adopt good financial habits that can help you reach financial freedom.

Minimize TV Time

How much time do you dedicate to TV? You might be wondering how watching TV can keep you from achieving financial freedom, right?

Well TV is an advertising platform where people run all kinds of convincing ads that could make you get tempted to buy. In fact, watching TV could lead to impulse buying because the more you watch TV shows the more you will see ads that will make you want to buy what’s being advertised.

Instead of watching TV spend time reading books about money and investing.

Keep Your Checkbook Balanced at All Times

Online banking has made many people forget about keeping their physical checkbooks balanced. This is because, with online banking, your balanced is just at your fingertips. This makes it easy to get an undersized balance.

Balance your checkbook so you know how much cash you have and how much you have spent regularly.

Say No To Impulse Buying

Impulse buying is also another reason that’s keeping people from attaining financial stability. It’s a bad financial habit that you must avoid at all costs by learning to say NO to yourself.

Think about it. You’ve gone out for some shopping, picked what you wanted but before you head to the counter, you see some items. Even though they aren’t necessary, you add them to your shopping because they don’t cost that much.

This is a recipe for impulse buying.

This is what many people do these days courtesy of online shopping. The thought that items will be delivered to the doorstep of the customer makes people end up buying on impulse.

Have a Retirement Savings Plan

If you don’t have a retirement savings plan, you’re going to struggle to reach financial freedom. The good news is that there is a couple of financial savings plans out there. You don’t necessarily need to have an employer to start a retirement savings plan.

Starting a retirement savings plan will enable you to contribute a little bit every month and by the time you realize, you have accumulated huge sums of money to help you live a stress-free and peaceful life.

13 Good Habits to Reach Financial Freedom: FAQs

Here are the most frequently asked questions by people looking to achieve financial freedom.

What are the good habits for reaching financial stability?

  • Set specific life goals
  • Determine your current financial standing 
  • Live within your means
  • Know the difference between needs and wants
  • Have a budget
  • Understand how much you spend
  • Trim your budget
  • Keep track of your credit score
  • Use debit cards instead of credit cards
  • Learn how to negotiate 
  • Learn to invest extra money
  • Maximize your means with passive income
  • Minimize eating out
  • Pay bills on time
  • Minimize TV time
  • Keep your checkbook balanced at all times
  • Say no to impulse buying
  • Have a retirement savings plan

What is Financial Freedom?

In other words, what is considered financial freedom or what is true financial freedom?

As stated above, financial freedom is the state of having enough money that you can invest, save, and still have enough cash on hand to cater for your daily life and that of your family while living the lifestyle you want. 

Financial Freedom vs. Financial Independence vs. Financial Security: What’s the Difference?

What is the difference between financial freedom, financial independence, and financial security?

These three terms are sometimes used interchangeably and in fact, many people think they are the same but are different things altogether.

Let’s take a look at the meaning of each term so you can understand the difference much better:

Financial freedom

Many people think that financial freedom is financial independence but that’s not the truth. Achieving financial independence is a stage on the path to achieving financial freedom. In other words, if you achieve financial independence, you’re a few steps away from achieving financial freedom.

Financial security

Financial security is also another phrase financial experts throw left, right, and center that leaves many people without financial knowledge confused thinking that it’s the same as financial freedom.

Financial security is when one is fired, loses their job, or their positions are declared redundant but they still have enough coming trickling in through other sources to cater for basic living expenses like food, clothing, shelter, etc.

Financial security is the first stage on the path towards achieving financial freedom.

If you’re financially secure, you’re confident that even if you lose your job, you can still take care of all your basic needs without seeking help from friends or family members.

Financial independence

Financial independence is the state when one has sufficient passive income to completely cover their current lifestyle.

If you’re financially independent, you can retire early live your current life without looking for a job. This is the state when you have multiple streams of income that brings continual income.

What are the Benefits of Financial Freedom?

As seen in the definition above, achieving financial freedom means not getting tied up on the job you don’t have passion for since you need to earn a living. In this case, you’re not controlled nor ruled by fear. You don’t worry about your car running out of gas or anything else.

When you’re truly financially free, you have less stress, improved health, and live a peaceful life.

Here are some more benefits of achieving financial freedom.

Less stress

When you have financial freedom, you feel secure and independent. These are the two most important basic human needs.
Remember that even though money can’t buy happiness, it can give you full control over how you want to live. With financial freedom, there is no sweating when unexpected expenses pop up. This makes life less stressful and more enjoyable.

Control over life

With financial freedom, you can do whatever you want without having to worry about the outcome. For instance, you can choose to work or not to because you have enough money to cater to your lifestyle.

Financial freedom allows one to take more risks

People with financial freedom aren’t afraid of taking more risks.

Think about the world’s billionaires like Elon Musk, Jeff Bezos, Richard Branson, Jack Ma, and others.

These people have traveled almost all countries around the world. Just the other day, Richard Branson, founder of the Virgin Group took a trip to space with Virgin Galactic. If this isn’t risk-taking, then what is?

You can do all this and more when you’re financially stable.

Financial freedom allows making decisions based on long-term goals

Financially stable people make decisions based on long-term goals and not for immediate survival. When you have big debts due each month, financial emergencies, it’s not easy to make decisions based on long-term goals.

How Do You Know You’ve Achieved Financial Freedom?

The reality is that people spend most of their lives looking for financial freedom. But how do you know you’re financially stable.

Here are signs to look out for that tell you have achieved financial freedom.

Finances don’t give you sleepless nights 

Financially stable people don’t lose sleep over finances. When they go to sleep, they sleep like small kids and live peacefully. What keeps them awake at night isn’t related to financials.

Credit cards are for convenience and rewards only

Financially stable people use credit cards not because they have run out of money but for convenience and reward purposes only.

Granted, many people who haven’t achieved financial freedom use credit cards to extend their paychecks. In other words, to buy things their income can’t cater for.

No need to worry about job loss

Financially stable people don’t worry about losing their jobs. See, a recent study suggests that 54% of the people in the US (approximately 125 million US adults) live from paycheck to paycheck. For these people, losing a job could bring financial disaster to their lives.

When you’re financially stable, the thought of losing a job doesn’t worry you.

You’re 100% productive on the job

Multiple studies have shown a close correlation between sleep and job performance.

Since you don’t have any financial stress and you sleep like a baby, you’re able to give 100% on the job. This is because you aren’t distracted by financial issues. You also don’t have to worry about unpaid bills or large debts. 

This makes you more productive on the job the next day you wake up.

Final Thoughts

So there you have it- 13 habits you can practice to achieve financial freedom. Remember that these habits won’t take away your money problems. However, they will help to guide you to develop good habits that can position you on the path to financial freedom.

Good luck!

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