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If you’re reading this, you’re one of the lucky people given an opportunity to live life. And you’re one of the people who want to achieve big things in it. There’s no settling for you. Achieving financial freedom is no longer a dream only old money can have. These days, people are being pulled out of poverty at record speeds. And there are a ton of people with new money succeeding financially. In this article, we’re going to share 15 habits to achieve financial freedom in 2022, so you can enjoy an exciting life.
Earning passive income is an important habit to achieve financial freedom. Your day job will help you acquire skills, but your side hustle will help you scale your income at a higher pace. There are tons of side hustles you can start. These days, a lot of people are starting a dropshipping business. You can use Spocket to find products to sell on your online store. Spocket boasts millions of dropshipping products, ranging from the latest fashion to automotive parts to organic skincare products. So you can virtually sell any physical product you’d like using the tool. You can sign-up for Spocket and then sign-up for an ecommerce provider like Shopify, BigCommerce, WooCommerce, Wix, or Squarespace. In addition, you can promote your online store on social media, through paid ads, affiliate marketing programs, or any other popular digital marketing efforts.
One of the early steps in achieving financial freedom is creating a budget. You can find free budget planners online. So, this step doesn’t need to cost a cent. Many banks will often share breakdowns of your spending by category for free. So, if you take a look at your credit card breakdown, you might find that you spend a bit too much money on food or retail shopping. Once you know what you’re overspending on, you can create a budget to help guide you. The key is to focus on the essential products you need rather than nice-to-haves. For instance, if you have a family of four, your grocery bill is expected to be higher than a family of two. So, maybe look at other areas where your spending is higher than usual. For example, you can check out forums, such as Reddit’s frugal thread, to find ideas on cutting costs on everyday items. There’s always a way to shop for a good deal.
Always pay off your credit card in full. Paying high interest on something you buy will keep you further away from your financial freedom goals. Starting with debt is normal, though. Often, debt can inspire us to dream bigger because we’re tired of being in the red. Whether your debts include student loans, medical bills, shopping purchases, or mortgage costs, aim to put more than the minimum payment towards it. The reason why a loan can grow more expensive over time is due to people paying the minimum each month. However, if you do a “no spend” month and use the savings to pay down your highest-interest debt, you’ll reduce your principal payment faster. If possible, aim to pay off student loans before moving out of your parents’ house. It becomes much harder to achieve financial freedom if you have expensive monthly payments like rent.
Stash away at least 10% of your earnings into an emergency fund every payday. In the post-pandemic world, job layoffs are becoming more common now that the surge in popularity has subsided for many industries. If your job benefited from people staying at home, there’s a risk of a layoff. Having an emergency fund helps protect you against the inevitable. Sometimes, people get severance, but you may not be eligible for it if you’re new to a company. That’s why it’s key to set aside your own savings. Stashing away about six months’ worth of income will help protect you if an unexpected cost or life event happens. But save the money for emergencies, like your roof caving in, job layoffs, or health emergencies.
Setting aside money for retirement is an important financial freedom habit. If your workplace has a retirement plan, you can set up an automatic payment plan that happens behind the scenes. That way, you’re not tempted to spend the money yourself. Since the money is being invested, you’ll earn appreciated value for it over time. Most retirement plans increase by about 8% per year, so that’s some additional income for you for when you retire. You can add up to 15% of your income to your retirement savings. And since you don’t have access to it until you retire, it allows you to grow your savings for when that day finally comes. Achieving financial freedom is as much of a long-term play as it is a short-term play. The goal isn’t to be financially free for now but for life.
Most people set random goals for themselves, such as “I want to be a millionaire.” However, coming up with goals isn’t as easy as people think. Creating a vision board can help you think about your whole life in the grand scheme of things. Why do you want to achieve financial freedom? What’s the whole life vision that you see for yourself? You need to know if it’s really about money, peace, happiness, or other goals. You can find vision board books on Amazon that you can cut pictures out of, and some even include images of blank cheques that you can add your specific dollar amount goal. Creating a vision board is all about thinking about goals from a broader perspective to understand what you want from your life.
After you’ve created it, place it in your home office, bedroom, or wherever you can look at it often. Every time you achieve one of the things on your vision board, you can do a happy dance in front of it. The vision board’s main magical power is that it reminds you of your goals when you feel like giving up. That’s why they work.
You can’t achieve financial freedom without investing your money somewhere. Whether you invest in crypto, real estate, or the stock market is up to you. However, you need to pick something that will appreciate in value. Many investors choose real estate because there’s a finite amount of land on our planet, so there are only so many houses that can be built. Risk-takers like cryptocurrency because of the potential big upswings they can get in return. Traditional investors choose the stock market, particularly if they’re knowledgeable about a specific industry. There’s no one path that works for everybody. You need to choose to invest your money in the area you’re most knowledgeable in. And if you’re not an expert in any of them, you can work with experts who can spot a good deal or follow influencers with good track records. However, investing your money isn't something you throw your money at. You'll need to do research to become financially free when investing.
Speaking of research, those looking to achieve financial freedom should spend a lot of time reading financial news. How is inflation going to affect your active income? Will rising interest rates negatively impact your mortgage renewal? What are the best places to invest your money? Financial news is constantly changing as life events happen. In the next few years, we’ll be seeing how inflation affects our savings, salaries, and spending habits. You can read books about finance, blog posts, and news sites. Aim to strive to read as much as possible, so you can see trends and hear many perspectives. Everyone will have a different angle. You won’t know who is right or wrong until time tells. So, get as many perspectives as possible and come up with your own conclusion based on recurring patterns you hear about.
Those looking to achieve financial freedom should consider joining companies with stock options if they need an active income source. If you join a company pre-IPO, you could potentially earn tens of thousands of dollars from selling your shares. Of course, there is a risk that the shares will be worth nothing. So, aim to join companies in growing industries. In tech, many people are joining ecommerce, fin-tech, crypto, cybersecurity, and metaverse companies as those industries are where society is heading. Aim to switch jobs every couple of years to increase your salary at a faster rate.
It’s easy for spending habits to get out of control, especially when actively using credit cards. The best way to ensure you become financially free is to live below your means. That means spending quite a bit less than you earn. You should have enough disposable income to be able to save for a rainy day, invest money, and maybe pursue a side hustle or two. The easiest way to live below your means is to track your spending. You might also use a free site blocker to block websites you tend to impulse buy from too much.
To achieve financial freedom, it’s best to network with people in the know. There are countless places to chat with financial experts. A word of caution: nearly every financial expert will want to sell you something. So, it’s best to network with people from all walks of life, in different industries related to finance and so on, to get a broader look at things. You can source Reddit forums, such as /r/personal finance or /r/financialindependence, and ask questions related to specific topics you’d like to learn more about. You can also speak with mortgage experts regarding industry trends, crypto businesses to understand all of the niches in the industry, or stock pickers to learn which companies are thriving.
If you want to achieve financial freedom, you’ll need to save money. However, canceling insurance is not where you want to skimp your money. There have been too many horror stories of people canceling their insurance the day before a heart attack. While having insurance does cost money, canceling it can be catastrophic. Insurance can help pay for lost time at work during an accident, pay your family in case of accidental death, etc.
Many financial experts will tell you that owning a home is bad debt. And there’s some truth to it; however, overall, it’s better to own a home than rent when it comes to financial freedom. Those who rent typically have to pay an increasing amount of money with each renewal. However, those who own have a set fee they pay for years to come. When it comes time to retire, you can downsize your home and live off the profit in retirement. It’s almost like a huge savings account that you put money into. Some areas are more likely to appreciate in value than others, so you need to be strategic about where you live. However, even if your house is worth less than you paid for, you still end up with more money from selling it than if you were to rent.
In finance, top experts recommend paying yourself first before paying creditors. The reason why this works is because if you pay yourself a specific amount each month for your investments, you’ll need to earn more money if you don’t have enough to pay down your creditors. Dealing with creditors can be a nightmare. So, it helps motivate you to build passive income streams, start businesses, and pick up additional work to pay down bills. This is one of those financial freedom habits experts swear by.
Lastly, a habit of achieving financial freedom is to focus on improving your credit score. With a good credit score, you’ll be able to take on better deals for loans and lower interest rates for mortgage renewals. Having a high credit score shows lenders that you’re less risky than someone who doesn’t pay bills on time. So, actively use a credit card to improve your score, but only use an amount that allows you to pay back debt each month. Avoid going into overdraft with any loans or bills you have.
Nicole Martins Ferreira is an experienced ecommerce entrepreneur who's built online stores in various niches. In her spare time, she shares her experiences with others, so they can succeed in ecommerce too.
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