Achieving financial freedom is a goal that many aim for, but only a fraction manage to accomplish!
But here’s the catch – financial freedom is less about making more money, but more about adopting certain habits and mindsets that set you up for financial success.
Here are 7 habits that can help you on your journey to financial independence. 👇
1. Set Clear Financial Goals
The first step towards financial freedom is setting clear, achievable financial goals. Whether it's paying off debt, saving for retirement, or building an emergency fund, having a specific target can motivate you to stay on track.
If you’re unsure of where to start, here are some questions you can answer to get a clearer picture:
Answering these questions will help you create a roadmap that will guide your financial decisions!
Once you've set your main goals, break them down into smaller, more manageable parts. Having short-term, mid-term, and long-term goals can make your financial journey seem less daunting and more achievable.
Keep track of your progress regularly. Use budgeting tools or financial apps to monitor your spending and saving habits. This not only keeps you accountable but also provides a visual representation of your progress, which can be very motivating.
2. Live Below Your Means
To live below your means, you need to fully understand and track your income and expenses.
As a first step, you need to see where your money is going and identify areas where you can cut back. Try to record these expenses regularly on your mobile notes app, or in a Google Sheets file where you can see where most of your income is spent on.
Along with that, aim to create a budget that reflects your financial goals. A simple formula is the 50-30-20 rule.
It's one thing to create a budget, but sticking to it requires discipline. Avoid impulse purchases and unnecessary expenses. If you find this difficult, try having an accountability partner and have them keep a check on you!
3. Prioritize A No-Debt Lifestyle
Credit cards can seem like free money, but they're not. Understand that credit cards come with high-interest rates. If you don't pay off your balance in full each month, you'll end up paying much more for your purchases!
Large expenses like university tuition may force you to go for student loans, but remember, they're a long-term commitment. I’d suggest you explore scholarships, grants, and part-time work as alternatives, especially since most degrees nowadays don’t guarantee high-paying jobs - so borrow wisely!
If you want to make a big purchase soon, like a new car or a trip abroad, try to plan and save for it instead of getting a loan. It might take longer, but you won’t have the stress of debt hanging over your head.
The no-debt lifestyle may seem like a simple thing theoretically, but it’s extremely necessary to talk about it! I’ve seen how it shatters the dreams of many people on their journey towards financial freedom. One wrong loan decision and it takes away 10+ years of your life EASILY. So make sure you live a life of minimalism and have a long-term approach instead of borrowing money from elsewhere.
4. Save and Invest
An emergency fund is a safety net that can cover unexpected expenses or financial hardships. Saving around 3-6 months' worth of living expenses in a separate, easily accessible account helps to give you a financial cushion.
Investing is a powerful tool for wealth creation. Consider various investment options like stocks, bonds, mutual funds, and real estate. Diversify your portfolio to spread risk and maximize potential returns.
If you’re in your early 20s, I would suggest investing in your skillsets first before you go into trading options like stocks and other stuff. If you think about it, you can earn 2-10x (or more) in under a year if you learn a skill and know how to sell it. On the other hand, stocks would give you a 10% return after a year on average.
But situations vary for each person! If you're new to this and want to dive into investing, consider seeking advice from a financial advisor. They can provide better insights and guidance to help you make the best investment decisions as per your goals.
5. Learning Never Stops
This habit is not just a habit, it’s a whole lifestyle! It applies to all areas of your life.
Aim to constantly learn more about personal finance, investing, and financial freedom. Read books, take online courses, attend seminars, or follow business/finance blogs and podcasts. The more you know, the more you’ll learn, and the better decisions you'll make.
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Pro-tip: Financial mistakes can be extremely punishing. Try looking for examples or case studies of people who were in similar situations as you’re in now. Study what financial, business, or career decisions they took and how they led them there – this will give you a general understanding of certain actions, their impact, and will help you to learn or avoid repeating them in the future.
6. Develop Multiple Streams of Income
I’d say this tip is one of the reasons I started ‘Investing at 25’ in the first place. 😅
Here’s a scary stat: 2023 had more layoffs than 2022 overall – and with the rapid rise of AI, things don’t look pretty in the job market either.
The action step here is to stop relying on a single source of income. Look for ways to increase your earnings, such as taking on freelance work, starting a side business, or investing in income-generating assets to earn passively.
P.S. We’re working on something super exciting related to building extra income sources. Keep following Investing at 25 on LinkedIn and Instagram to stay in the loop for what’s to come. 👀
7. Maintain an Abundant Mindset
An abundant mindset is the belief that there's plenty of wealth to go around and that you're capable of achieving financial independence.
Anyone else’s financial success doesn’t mean that there won’t be enough for you. Trust me, money flows from one pocket to another, and there’s MORE than enough money for you to live comfortably in this world.
All the top businesspeople and professionals have this positive mindset – it acts as an anchor to motivate them to pursue their financial goals with confidence and ease.
As cliche as it may sound, financial freedom doesn't happen overnight. It requires patience, persistence, and consistent effort. Remember to celebrate the small wins along the way, stay focused on your long-term goals, and keep your chin up for all the great things that are to come. 💯
Final Words
Achieving financial freedom is a journey that involves more than just making money. It requires adopting healthy financial habits, having a clear plan, and maintaining a positive mindset.
If there’s any single habit I’d like to emphasize here, it would be to focus on maximizing your income streams. It helps solve more than half of your problems in your financial journey. It doesn’t mean it’s the only part of the puzzle, but rather a big chunk of it!
You’re all set! Now go practice one of these habits and pave your way to financial freedom my friend. 💸♥️
