What Achieving Financial Freedom Could Mean to You!

https://www.daveramsey.com/blog/what-is-financial-freedom

Financial freedom has to be personal. Dream big and get specific about your goal.

What does financial independence look like for you? Maybe it looks something like this:

Freedom to choose a career you love without worrying about money. Freedom to take an international trip every year without it straining on your budget. Freedom to pay cash for a new ski boat. Freedom to respond to the needs of others with outrageous generosityFreedom to retire a whole decade early

When you are financially independent, you have options. You don’t have to wonder if your bank account can handle replacing your hot water heater or buying groceries for a single mom who just lost her job.

Learn How to Manage Money

Building wealth is essentially impossible if you live paycheck to paycheck. Assign your money and have it work for you. Each dollar and cent must be specifically assigned to a special account or bill. There is no such notion as extra cash, as your money should have an assignment.

Clean Up Your Finances

Now that you're taking steps to learn how to manage your funds, let's avoid the previous missteps that could lead to a financial relapse. Find and employ alternatives other than the use of credit cards, student, and car loans. Begin by saving $1000 in emergency funds. Next, begin to pay off your debts, one at a time. Use Dave Ramsey's Snowball method to tackle the debt. Remember, becoming debt-free and financially healthy is your goal!

Be Smart About Your Career Choice

This notion is huge! Where will your career choice place you in the next 10 years? Think from front to back. Ask yourself these questions: 1)Does this career choice compliment your future financial goals? 2) Is there income-driven potential? 3) Will you be satisfied in the line of work? 4) Is there an opportunity for growth in this field?

Choosing the right career choice could substantially impact your financial goals.

Look at a Savings Plan

Earlier we addressed the importance of the emergency fund, now we will dig into long-term savings goals. Heaven forbid an individual loses their job, how would one handle recurring necessities? Pay off your debts and put money away to the side. A savings account could offset the need to make an emergency withdrawal from a 401K to cover car & home repairs and medical and household expenses. Rest assured, knowing that you have a plan in place to cover unexpected financial events!

Maximize Your Increase By Investing

Retirement Savings

Start by working with your financial advisor to take advantage of the tax-favored retirement accounts that are available to you at work, like your 401(k) or 403(b). How much should you invest toward retirement? Shoot for 15% of your income. And if your employer offers a match on contributions to your 401(k), take it! Don’t say no to free money.

If you have access to a Roth 401(k) at work with good mutual fund options, great! You can invest your full 15% there. But if you have a traditional 401(k), invest up to the match then invest what’s left of your 15% in a Roth IRA. If you still have part of your 15% left after maxing out a Roth IRA, go back to your 401(k).

Why is a Roth a good idea? When you invest in a Roth 401(k) or Roth IRA, the money you invest grows tax-free. That means you don’t have to pay taxes on it when you withdraw money in retirement. That’s a big benefit you don’t want to miss out on.

College Savings

If you’re already contributing 15% of your income to retirement and you want to start saving for your kids’ college fund, you can start by investing in an Education Savings Account (ESA). Like a Roth IRA, the money you contribute to an ESA grows tax-free, which means you won’t pay taxes on it when it’s used to cover college expenses. Currently you can contribute up to $2,000 per year for each child in an ESA. Income limits do apply, and your investing pro can help you know if those impact you.(1)

If you want to save beyond an ESA, talk to your financial advisor about a 529 plan. These plans also grow tax-free! Just be aware that there are some 529 plans you should avoid. Steer clear of pre-paid tuition plans and fixed investment options.(2)

The great thing about saving for your kids’ college is that by helping them avoid student debt, you’re setting them up for financial freedom too!

Real Estate Investments

Your home should be part of your plan for financial freedom, not something holding you back from achieving it. That’s why it’s so important to make wise decisions about the kind of home you purchase and how you choose to finance it. If you buy a home that is a good investment, it will continue to grow in value as the years go by.

Once you’re investing 15% of your income into retirement accounts, you should use any extra money coming in to pay off your house. Attack it with a vengeance! Getting rid of your mortgage is a huge milestone in your journey to financial independence.

Don’t even think about owning rental properties until your house is paid for. And even then, you should only invest in rental properties if you can afford to pay cash for the property and you’re willing to deal with any hassle involved in the rental process.

Taxable Investments

When your house is paid for, you can contribute more than 15% of your income to investments. But before you jump to taxable investing, make sure you’re taking advantage of all the tax-favored accounts you can—like your workplace 401(k) and IRAs.

If you’re ready to move into taxable accounts, stick with a simple investing approach and work with your financial advisor to choose good growth stock mutual funds with a long history of above-average performance.

When you invest outside of tax-favored retirement accounts, you’ll pay taxes on the money you invest. You should also be prepared to pay taxes on capital gains and qualified dividends. But choosing mutual funds with a low turnover rate can help you minimize the tax impact.