5 Steps to Financial Freedom You Can Start Taking Today

I’m a big advocate of setting goals. With clear objectives come focus, drive and that irreplaceable sense of achievement once you check a big item off your to-do list. When you feel aimless, a goal can show you how to get back on track – financially, professionally, even emotionally. If we’re talking about something you and your spouse have to do together – improving your financial situation, for example – shared goals make sure that you’re on the same page.

For some, there’s a sense of hesitancy to set goals if there’s a chance you’ll miss. To come up short, for whatever reason, seems more painful than not trying at all. In my mind, this kind of thinking can only hold you back. I can’t tell you how many goals I set each year that either get pushed off or forgotten. It’s not from lack of desire or effort, but because I’ve set too many goals and my priorities shift as different things get accomplished. Business is good and I’m living a happy life, so why would I get bent out of shape over the one or two things I didn’t finish in time?

If you set the goal of making $1,000,000 in the next two years, that might be far-fetched. And if it is, if you try your hardest and only save an extra $10,000, is that bad? Statistically, you missed the mark by a mile, but if your effort produced some extra money, so why be anything other than pleased with yourself?

In the end, it’s about understanding the intention of your goals. I don’t think every aspiration needs to be realized within a set time frame. Each one doesn’t even need to come with a dollar value attached. Instead, some of our goals should dangle in front of us for years on end, keeping us honest as we continually strive to do better.

In this post, we’ll talk about five financial bucket list items that you may or may not have thought about achieving. It’s possible that you’ve already checked some of them off. Even if they seem outside your current realm of possibility, I think you should confidently set these goals and see what it feels like to work toward them. You might surprise yourself with how quickly fixing your finances goes from an untouchable dream to a feasible reality.

To be clear, I don’t want you waiting until you’re old to start on this financial bucket list. These items are for near-immediate action.

1. Get Out of Debt

Debt serves as the main reason people don’t set or accomplish other financial goals. Figuring out how to get out of debt is therefore always among the first steps to financial freedom. With $50,000 owed to banks and creditors, there’s no time to think about saving for anything else. That’s why this has to be in a prime spot on your financial bucket list and you have to get to work on it ASAP – it really is that simple.

Everyone who once had debt and finally paid it off knows that exceptional feeling of relief. We also know that it once felt like financial freedom was an impossibility. It’s been quite a few years since I dug myself out of a massive pile of debt and I still remember those days when I didn’t think I’d ever learn how to get back on track financially. Setting goals for myself was the first and possibly most important step.

There are plenty of resources that show you the nuts and bolts of how to get out of debt. More than anything else, though, paying off your outstanding balances takes resolve. Figuring out money on an intellectual level does nothing if you don’t also make an effort on the emotional side. You have to decide that nothing matters more than freeing yourself from those burdens. The reason you have debt is probably that you figured it would be an okay thing to live with, and now it looms over everything you do and every decision you make.

It’s time to end the cycle. Stop waiting for the windfall that isn’t coming or a bank error that magically wipes your balances away. Choose financial freedom over the expenses you don’t actually need. Debt becomes a lifestyle for many people, especially those who enter adulthood already saddled with debilitating student loans. The top item on your bucket list should be changing that pattern so you can move on with the rest of your life.

2. Buy Property

For investors with substantial cash flow, buying real estate to hold, rent or sell comes naturally. For everyone who doesn’t own property, spending a few hundred thousand dollars seems utterly impossible.

Like so many other steps to financial freedom, once you establish your intention to buy a home and start saving for a down payment, this purchase goes from unfathomable to “why didn’t I do this earlier?” Homeownership requires an especially delicate shift in mindset: you have to be in the right place financially before taking the leap, but you can also improve your financial position as you create equity. It’s a fine line, but one you can absolutely walk if you do so carefully.

In the wrong situation, taking on a mortgage makes zero sense. With the right plan, you can actually afford more house than you might expect. Here are some things to keep in mind about real estate investments for beginners:

Mortgage = Rent

If you presently pay rent to a landlord each month, you aren’t too far away from paying a mortgage. While owning a house does come with additional costs, you just need to factor those into your budget and you’ll come up with a number for what you can afford each month. You don’t want to spend more than 25-30% of your monthly income on housing, so look at your rent and your earnings, figure out the money implications of committing to a long-term mortgage, and decide on your target number.

Just doing that math puts you one step closer to beginning to invest in property. Now, you can start saving up for the down payment, and before you know it you’ll be ready to talk to realtors and make your dreams come true.

Houses Generate Income

Thousands of people buy properties that they can’t afford to put their families in but can afford to rent or sell. With a down payment and a good mortgage, you can own a rental that pays for itself. With a good team and the right market, you can buy and flip a house, ending up with thousands of dollars in profit. If the goal is buying property, there are multiple ways to make the process financially feasible.

Prices Fluctuate

While the overall price of real estate will continue to rise, the market shifts and you don’t always have to pay sticker price for the houses up for sale. Sometimes sellers will accept a slightly lower bid in hopes of closing faster; other times yours will be the best offer on the table and you’ll get lucky. Should the market take a serious dip and you stay in good enough financial standing to move on a property, that could make all the difference in the world. Timing is always a factor when it comes to real estate investments; for beginners, a lot of this comes down to keeping your eyes open and having enough money for a down payment in the bank.

For some, it’s just not the right time to buy real estate. For most, it seems like it’s the wrong time when really you just need to prepare and wait for the timing to be right. With a little bit saved up and a good mortgage, you can go from renter to homeowner in a hot second.

3. Turn Your Credit Cards Into Money Makers

Debt and credit cards are almost synonymous to some people, and with good reason. If you don’t have the self-control to spend responsibly using plastic, I’d rather you lock those cards in a safe and then throw that safe into the ocean. Conversely, if you have the budgeting skills to spend on credit without getting ensnared in an interest trap, credit cards can make you rich rich rich!

Whether it’s cash back, travel points, or rewards through your favorite retailer, Visa, Mastercard, and everyone else pull out all the stops to entice spending. For the irresponsible, these spending sirens lead to future financial woes; for the monetarily wise, you can spin groceries and gas purchases into a trip to the Bahamas.

Earning credit card rewards is downright simple if you crunch the numbers and make the right choices. If you spend enough, you can even afford a snazzy card with an annual fee, although there are plenty of good credit card rewards programs that don’t require anything beyond regular swiping. Figuring out money-making card choices for your particular lifestyle is usually worth it, though. Long-distance commuters may prefer a card that rewards you plenty of points on fuel purchases, for instance, while parents can look at cash-back programs on groceries.

You stand to get the biggest rewards from cash-back cards that encourage certain types of spending, assuming you regularly incur the promoted expenses. Some Discover cards offer 5% cash back on gas spending, which can be a huge plus for commuters. Cards associated with certain airlines often give double points on airfare purchases, so your monthly business flights on Southwest or United can turn into free vacation travel pretty quickly.

If you really want to use points to your advantage, you need to stick to your spending plan. I recommend separating business and personal expenses to keep your balance sheets tidy. While you might be able to earn more points by putting everything on one card, you run the risk of confusing your budgets and getting into trouble.

You also need to pick practical rewards. You might love shopping at a certain outlet, but how often do you actually go to that store? Will having a credit card that earns you Amazon points encourage you to shop more than you need to? Remember, the goal is to get free money from the creditors, not just to get a discount on frivolous spending.

Since most of us have to travel from time to time, either for work or vacation, airline rewards make a lot of sense. You might not get the same instant gratification as you do with 5% cash back, but when your Christmas travel gets knocked down from $1,200 to $200, you’ll feel pretty good about yourself.

This is the easiest of the bucket list items and it can help with all your other savings goals. Get sensible credit cards, automate your payments, budget for that spending and watch the rewards roll in. If you aren’t already making money off the cards in your wallet, you should get to work on that the minute you finish reading this post.

4. Invest in a Business

No intention of starting your own company? No problem. You can always help other people start theirs.

Until you put capital into a growing company and see the returns firsthand, it’s hard to imagine how you can fit into the process. Once you’ve become an investor and experienced both the pride of helping another entrepreneur and the joy of making good on your investment, it becomes a preferred investing tool.

If you have a retirement account, you’re already beginning to invest in businesses. Granted, you probably let brokers and managers make the decisions and you invest in publicly traded companies, but you still use your money to back certain enterprises. If you choose to make that funding a little more proactive, you open your portfolio and revenue streams up to all sorts of new options.

Starting your own business takes all the time, money and brainpower you can muster. If you don’t want to become your own boss in this way, I don’t blame you. You can have a tremendously successful career without filing for a business license or figuring out the money aspects of running one.

However, if you like the idea of leaving a significant imprint and having an impact on a business, giving capital to a young company can deliver both that sense of accomplishment as well as a steady stream of revenue. Depending on the company and your personal means, you can play either a very active role or remain relatively hands-off.

With this kind of personal stake in a company, you’ll feel involved as an investor and a business partner. You’ll have a notable influence on a range of people, and your efforts will do good for your local community.

If you’re anything like me, investing in young companies might become addictive. It’s a great way to diversify your assets, bring in additional income and help people. For everyone from the billionaire investor to the middle-class couple trying to help a friend with a solid plan, there are tiers of small business investing for all types of people.

5. Retire Young

Unlike real estate and small businesses, investment in your own future takes a lot of time and planning. People don’t retire at 65 because they had no interest in retiring earlier, but rather because most people don’t have the option until they’re pushing 70. Even with IRS rules, you’d still see a lot more people stepping out of the workforce at 45 or 50 if their savings allowed for it. For many of us, this is the goal all the steps to financial freedom lead up to.

With the right strategy and some hard work, anyone can ditch the cubicle a few decades early. You’ll need to have a sizeable nest egg, so don’t get excited about retiring while still beyond on bills or figuring out how to get out of debt. If you want to live without working, you need to have fixed expenses and enough money to support that lifestyle.

The internet abounds with stories of people who left their jobs at 30 or 40 years old and now travel full-time and live off $30,000/year – even with kids! All of those stories share two common themes:

● No debt

● Lots of liquidity

An IRA or a 401(k) doesn’t do you much good if you want to retire early. Sure, you can access those funds, but the penalty makes it hard to justify the choice. Similarly, a mortgage eating into your funds makes it hard to leave the world of earned income. To really hang up your work boots, you need to have a mix of accessible savings, growing investments, and debt-free accounts.

As soon as your house is paid off, you can start thinking of retirement. If you have a couple of million dollars in stocks and bonds, you might be able to generate your annual income just from those investments. If you don’t have millions invested, keep pushing to save and put your money to work. In some cases, the hardest part isn’t saving the money – it’s reframing your concept of how that money can work for you. Intelligent, low-risk real estate investments for beginners or investing in small businesses are some possible routes, but what will work best for you is something you’ll have to assess yourself.

If you set yourself the goal of retiring at 55 and don’t get there until you’re 58, that’s not a failure by any stretch. When you turn 60 and you’ve already been happily retired for two years, you’ll be very pleased with your efforts.

As long as you can fend off discouragement, no ill can come from setting goals, however pie-in-the-sky they may seem at the moment. Whatever you accomplish or don’t accomplish, trying to save and put your wealth to work will help you in the long run. Don’t get overwhelmed by your debt or the cost of a house, just decide where you want to end up and take baby steps toward the end result. Do the work and I promise good things will happen.

Make it happen!

Taylor & Megan Kovar

The Money Couple