7 Steps to Financial Freedom

  

Most Americans are too materialist and focus all the energy and money on buying things. You can have financial freedom no matter what your current financial situation. Elinor Sauerwein was an elderly poor woman who saved her money and donated over $1,000,000 to charity. Oseola McCarty was an elderly poor woman who saved her money and donated over $150,000 to a local college. Both women lived a simple life but always had everything they needed.

Financial freedom requires changing your mindset, changing the way you think about money. If you believe you will always be poor, you will. If you believe you will always be in debt, you will. Your words are powerful and your actions are even more powerful. Your thoughts, attitudes, beliefs and actions always have to align with your financial goals. 

Not everyone may become wealthy but you can have financial freedom. Having financial freedom is being in control of your finances, spending money responsibly, buying needs more often than buying wants, and setting financial goals for your future.  Here are seven steps to financial freedom.

1.      Budget. Track your spending daily or weekly using pen and paper, a Word or Excel document, an app or online banking. The key to financial freedom is creating a monthly spending plan and spending less than you earn.

2.      Less. Less is more. Spend less than you earn. Buy more needs versus wants. If you have less than 5% of your monthly income left over each month you need to reduce spending by 30% - 50%. Use the money left over to contribute to a savings account or pay down debt. Avoid buying liabilities or things that have no value such as designer clothes, shoes, cars, games, electronics and accessories. Buy items that appreciate over time and have value such as homes, stocks, bonds, diamonds, gold or art.

3.      Become a homeowner. Becoming a homeowner provides a tax write-off, increases your financial worth and provides you with an asset that will appreciate over time. Visit www.hud.gov for information on buying a home.

4.      Buy insurance. Buy health, life and disability insurance. Many people get in debt from medical costs because they do not have health insurance.  Disability insurance will help you if you become seriously ill and have to be off work for an extended period of time. This will also help you to recover because you will not have to worry about how your bills will be paid during your time off from work. Life insurance helps cover burial costs after a loved one has passed.

5. Pay off your debts. Paying off debt is a key factor in obtaining financial freedom.  Pay off credit card debt first starting with the smallest bill. Then begin paying off loans and any other debt.
6. Plan for your retirement. Many Americans have to work past retirement age because they have no savings or retirement.  Contact a brokerage company and open a no load mutual fund.  Visit www.morningstar.com for information on planning for retirement. 
7. Start a business. Find out what your passion is, what you love to do more than anything else. Do your research before starting your business. You can start your business in your home; there are many tax write-offs for home based businesses. Contact the Small Business Administration at www.sba.gov for information on starting a business.

By following these steps, developing practical spending habits and investing your money wisely you will be well on your way to financial freedom.

Are You Stealing From Yourself

                                                   

Are you a thief? If you are in debt and have no savings or retirement you are a thief and are stealing from yourself.  According to a new report by the Consumer Federation of America and the Certified Financial Planner Board of Standards, 38% of Americans are living paycheck to paycheck.  One out of every 7 Americans has 10 credit cards.  According to the Federal Reserve Bank of New York, more Americans owe money on student loans than on credit cards. 

The Consumer Financial Protection Bureau (CFPB) estimates that 30 million Americans have debt with collection agencies. 43% of Americans spend more than they earn.   According to a new University of Michigan report 1 out of 5 families owes more on credit cards, medical bills, student loans and other unsecured debt than they have in savings. 

Many Americans have no emergency fund and little or no retirement savings. According to EBRI's 2012 Retirement Confidence Survey 60% of employees state that the value of their savings and investments is less than $25,000.  Due to the recession and its after-effects many Americans were unemployed for long periods of time and exhausted their savings and retirement accounts and racked up mounds of debt.  

Each time you swipe your credit card interest is accruing on the credit card balance.  If you don’t pay the balance off at the end of the month your credit card balance will continue to grow.  Paying for an item with a credit card on average costs 110% more than the original cost of the item.  Owing credit card debt makes the credit card companies rich and makes you poor.

Many Americans are so focused on paying down debt they forget about saving money.  No matter how much debt you owe you should also contribute to a savings account. Invest in yourself by contributing to a savings account.  You should have enough in an emergency savings account that covers your total monthly expenses and bills for 9-12 months.  You should put yourself first and follow the “Pay Yourself First” principle by putting money aside towards a savings account even if it is $1 a week then pay everyone else.   

If you are living paycheck to paycheck find a way to reduce your spending such as bring your lunch to work, skip the Starbucks and bring your own coffee from home, shop at discount grocery stores and discount stores such as Aldi’s, Save-a-Lot, Wal-Mart, Target, Bottom Dollar Food, Grocery Outlet and buy store brands, use coupons. You may prefer to buy meat, dairy products and fruits and vegetables at a local farmers market or a regular grocery store. 

Buying items you cannot afford it simply stealing from yourself.  Buying a car that costs more than your annual salary, owning a home that is upside down, owing student loans with a balance of $50,000 or more is not practical and causes extreme financial hardship.  If you make sacrifices earlier in life and do research to find the best offer for a loan or credit card, contribute regularly to a savings account and educate yourself about interest rates, credit card and personal finance you will be in a better financial position.  You will have to make hard sacrifices to get yourself out of debt.  Here are 13 ways to stop stealing from your yourself.

1. Pay in full. Pay balance in full each month to avoid paying finance charges.
2. Pay bi-monthly. Pay half of the balance with 1^st paycheck of the month then pay the remaining balance with 2^nd paycheck of the month.
3. Pay weekly. Pay the minimum monthly payment the 1st week after you get the bill, and then each week pay as much as you can toward the monthly balance. Repeat this every month.
4. Pay extra. Pay as much as you can when you get the bill, and then pay more towards the bill when you get extra money.
5. Automate. Set up automatic payments from your checking account the day you receive your paycheck or the day after you receive your paycheck to pay down debt.
6. Use unexpected income. Use your income tax refund, economic stimulus check, bonus check or sell new or used items on eBay.
7. Negotiate. Negotiate for a lower interest rate, get fees waived or request a settlement to help reduce the balance owed to make it easier to pay down debt.
8. Create a budget.  Balance your checkbook and create a budget to identify what you owe, what you earn and what you spend to find areas where you can reduce spending. Pay no more than 35% of your total monthly income towards housing, pay no more than 15% towards transportation, pay no more than 10% towards debt excluding mortgage, pay 10% towards savings and pay no more than 25% towards remaining expenses to create a balanced budget.
9. Live Below Your Means.  Buy needs vs. wants; buy only the things you need, delay the things you want until you have the money to purchase the item.
10. Pay with cash. Use credit cards for emergencies only and purchase items with cash.
11. Purchases. Avoid making bad decisions such as buying rent-to-own furniture or buying a big screen television and other items that have no value. 
12. Pay on time. Avoid paying late fees whenever possible. If you know you will pay a bill late contact the company to setup payment arrangements.
13. Keep balances low. Keep credit card balances at 20% or less of the credit limit.