It’s good to be back for round two of our Financial Wellness Blog Series. At GOLD, you’ll hear us talking about financial freedom regularly, in fact, it’s in our Vision Statement, which is, “As a collaboration of equals, we believe that personal financial freedom can change the world. Through service, education, innovation, and transparency, GOLD Credit Union creates opportunity for every Member today and for the world tomorrow.”
You see, we believe we can make a difference in our Members’ lives and our community by helping you achieve financial freedom as you define it. So, what exactly does it mean to achieve financial freedom? If you asked a room full of a dozen people what financial freedom means to them, you’d probably receive twelve completely different answers. For some, it means having enough savings, investments, and cash on hand to afford a comfortable life for themselves and their families or being completely debt free. For others, it means retiring at an early age whether it be to travel the world, start new hobbies, or relax with their kids and grandkids. And perhaps for a few others, it may be pursuing a dream career without having to be concerned with earning a specific annual salary. None of those definitions are wrong, but that doesn’t mean that they are “right” for you either.
Financial freedom isn’t one-size-fits-all, and we wouldn’t be doing you any justice if we dictated what your financial freedom should entail. When we say we want to help you achieve financial freedom as you define it, we mean exactly what we say; it’s defined by you and only you. We can certainly provide you with tips here and there, and that’s what I’m here to do today, but ultimately, it’s up to you to pave your own path to financial freedom and live a financially healthy life.
There are many benefits to taking a comprehensive approach to managing your money and affording the lifestyle you want. So, without further ado, follow along as I share some tried-and-true steps that you, too, can take to ensure your financial success.
Establish Your Starting Point
Ask yourself the following questions: “Why should I save money?” “What are my financial goals and dreams?” “Why do I want to achieve financial freedom?” And be sure to answer them 100% honestly. Once you define what you’re trying to achieve and why and have specific goals in mind, it’s time to get an understanding of where you currently stand in order to get to where you want to be.
A good starting point would be to compile a list of all your debts including your mortgage, student loans, credit cards, and everything in between, and add it all up so you know just where you currently stand. Next, add up all the money you currently have in your savings and identify any financial holes you may have (such as a lack of emergency savings). Emergency savings accounts are different from regular savings account in that they are intended to only be used for what’s directly in its name: emergencies. Unfortunately, unplanned financial emergencies are something we have all faced or will face at some point in our lives—whether it’s an unexpected auto or home repair, car accident, job loss, or medical expense—it’s critical to be prepared and have a designated emergency fund to be used in the event of an emergency. Plus, your emergency savings will allow you to avoid dipping into your main savings account, which could potentially put years of saving at risk.
If you find that your everyday savings account is lacking, set a budgeted amount that you’re comfortable with and start automatically depositing to it regularly to begin building your savings. Stay committed to saving by putting away money from each paycheck or increase your contribution amount with your employer-sponsored savings plan. Every bit counts, no matter how much or how little you decide to stash away. From there, you’ll be able to watch your savings accumulate in real-time and at a faster pace than you may have thought, which will give you the positive reinforcement and motivation you need to remain dedicated in reaching your savings goals.
Set SMART Goals
Financial freedom is a lofty task but taking it one step at a time can help make it all the more manageable. Again, ask yourself the question, “What does financial freedom mean to me?” Then, set some SMART (Specific, Measurable, Achievable, Relevant, Time-Based) life goals. While setting your goals, think about important aspects of your future such as how much debt you'd like to pay off, how much money you’d like to have saved in the credit union, what you’d like to invest in, and then determine the age you’re hoping to achieve these by. The more specific your goals are, the more likely you’ll achieve them.
Got some goals of your own in mind? Excellent! Now is the time to keep track of them. Write them down, create a spreadsheet, use an app, or determine another method that’ll work best for you. Be sure to monitor your progress daily and celebrate all your financial victories—no matter how big or small they may be or seem. A year from now you find that you’re pleasantly surprised at just how much you’ve achieved in that timeframe making you feel even more motivated to continue setting and reaching your goals.
Pay Off Debt
Now that you have a total dollar amount for your debt, create a game plan to pay it down. I’d suggest focusing on paying off the debts you’re carrying with high-interest rates. This most likely falls under the realm of your credit card debt. Credit cards aren’t all bad and can even work in your favor, but not if they have a high interest rate where you find yourself consistently carrying over a balance month after month making it feel impossible to pay off. Figure out which cards have the highest rates and work to pay off the balance.
As for larger debts such as your mortgage, be sure to consistently make all your payments on time. This will help you build and maintain a good credit rating, which in turn can affect your borrowing power and interest rate should you need to take out other loans in the future. It’s also a very good idea to check your credit report at least once every year to make sure everything is being reported accurately and helps you to better understand your credit position.
Spend Less and Save More
If you love the thrill of swiping your debit or credit card, you’re not crazy, nor are you alone. Research suggests that shopping can release dopamine, the feel-good neurotransmitters your body produces. Now, I like a good retail-therapy session as much as you, but a big part of reaching financial freedom relies on you spending less and saving more.
Track your spending habits each month and trim spending on things that aren’t necessities. By doing this, you’ll have more money that can be allocated to your employer-sponsored savings plan, your personal savings account, or you can look at paying off some of the debt you’ve decided to eliminate. It’ll also help you realize how much less “stuff” you actually need to survive. That doesn’t mean you can’t enjoy life by splurging on a “want” every now and then and feeling like you must save every single penny until you retire. Just be sure to remember to pay yourself first by saving as much as you’re comfortable with, and then spend whatever is left over as you see fit. Additionally, I will say that I’ve found that quality time and moments shared with family and friends are worth far more than anything I’ve ever owned or splurged on.
Achieve Financial Freedom as You Define it
We all dream of being free of our financial burdens and by putting in the work and staying committed, you, too, can achieve financial freedom—however you define it. Although these tips won’t solve all your money problems overnight, they will help you create healthy money habits that’ll last a lifetime. In fact, by reading this, you’ve already positioned yourself closer to financial success and that’s something to be proud of.
From all of us at GOLD, we wish you all the success on your financial journey. And most importantly, we’re here for you and can help you get there.
Stay tuned for my next Financial Wellness blog in July!