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Financial freedom is certainly a worthwhile goal to strive toward. Financial independence means that no matter what happens, you can maintain your lifestyle and standard of living without going broke.

It may come as a surprise to find that financial freedom has less to do with how much money you earn and more to do with how much money you save.

Follow these five steps, and you will be on the path toward gaining financial freedom.

Take responsibility

For some Americans, growth in the economy hasn’t translated into personal prosperity. In fact, it seems to have led to growing income inequality whereby the wealthy reap huge gains as the rest of the population seems to stagnate. It is today’s harsh reality.

You may seemingly be making all the right financial decision, or you may be in trouble as a result of living beyond your means. Either way, financial fantasy won’t come to your aid. The federal government won’t give you a sympathy check nor will you win the lottery. Only you can help yourself; accept that and start taking steps towards financial freedom.

Live below your means

As long as your income is outpaced by your lifestyle, you’ll always be in financial trouble. It should be a no-brainer, but it’s a real struggle for most people. Many financial experts agree that the single most effective way of ensuring a secure financial future is living below your means.

You need to take a look at two of your biggest expenses that are your house and car.

The cost of housing (condo fees, rent payment, monthly mortgage, insurance premiums, property taxes, etc.) should not exceed 30% of your gross income. Similarly, your car expenses (monthly payments, insurance, and maintenance) should not exceed 10% of your gross income.

While this may appear difficult, you need to realize that unless you get a good grip on these two expenses, you’ll never get ahead. You may want to use online calculators that help you create a monthly budget so you can determine exactly where your money is going.

A good strategy for saving is setting up automatic deductions, i.e., pay yourself first. It can be done using your bank’s automatic draft or through a 401(k), which automatically transfers a specified monthly amount from your checking account to your savings account, forcing you to live on less.

Manage your debt The biggest hurdle to achieving financial freedom is debt, especially credit card debt with high interest. Huge credit card debt may take years to pay off if you make minimum monthly payments, and the interest on it is unreasonably high.

By paying more than the minimum required, you can clear your debt years earlier and save money. Make use of one of the many credit card repayment calculators available online to come up with the plan to pay off your debt in the fastest, most affordable way.

Going through life without debt is hard. Still, a home, good education, and a car are the only things that you should consider financing. A low-interest mortgage can be regarded as good debt as it often helps you accumulate equity and, most of the time, savings on tax.

If you need a car loan, you might want to use the 20/4/10 rule – make a down payment of 20%, finance the car for 4 or fewer years and make sure the total car expenses, including insurance, are less than 10% of your income.

Obtaining a student loan assumes; you are going to a school that is reasonably priced and studying something that you can someday draw a decent living from it.

If you need to get debt for something else, you probably can’t afford it. If you can realize and accept the fact that you can’t afford something, you can avoid always being in debt.

Save and Invest Wisely

According to most experts, 10% is the ideal part of your income to save. It might be more beneficial to save more. Saving should not be too difficult if you’re successfully implementing step 2.

Savings essentially buy and ensure security. It goes without saying that people worry less about their finances when they have more money in the bank. A good place to start is by setting up an emergency savings account, which should ideally have about six months of your monthly living expenses.

Further, match your employer’s 401(k) contributions. Starting your retirement savings early in your adulthood is critical to building financial security. An early start translates into a greater compounding effect in the future, enabling you to weather economic cycles.

Your emergency fund should be liquid, whereas your retirement fund should be invested in financial securities such as stocks and bonds.

Investing for the long term is also important. Some risk is necessary to get returns that outpace inflation rates. Even though stocks are volatile in the short term, they offer great returns in the long term.

Get Insurance

Walking down the street, driving around, or owning a home without insurance is taking on an insanely huge risk; one bad accident or incident could leave you bankrupt. Get health insurance and make sure you have enough auto and homeowner’s insurance to cover you in case the worst happens.


You have more control over your financial destiny than you think. As soon as you realize that, take the steps outlined above seriously and in time, you will see a marked improvement in your financial health. Eventually, your dream of attaining financial freedom will become a reality.

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