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How to Pave the Road to Financial Freedom Little by Little

How to Pave the Road to Financial Freedom Little by Little

Ah, financial freedom! I believe that there is not a single person in the world who does not have this as one of their life goals. Being economically self-sufficient is one of the quickest ways to happiness. I know “money doesn’t buy happiness”, but debt almost assuredly buys sleepless nights, mental breakdowns, and physical illness.

However, even if you have regular income it might be hard for you to stay out of debt, simply because making it from one paycheck to another is a mission that involves everyday puzzle-solving and navigating a labyrinth of impulse buys, small expenses here and there (which you think are necessary), and basically surviving. To stay on top of it, I will use a metaphor to help me explain.

Imagine if you will, a sieve. It’s a simple vessel with a bunch of little holes that let the water go through. The holes are little but there are so many that the water flows almost freely. The sieve in question is the labyrinth I’ve mentioned and the water is the amount of money you have each month. Now, the point of the sieve is to let the water through but the rate at which it flows can be regulated by plugging some of the holes.

That’s exactly what I will try to show you– how to plug those little holes that keep draining your money away each day.

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Take a strict list to the grocery store

The impulse buys are basically the worst enemy of financial freedom. While I will not advise you to never humor yourself (as I myself am not above it), doing this on a daily basis (or whenever you go to the grocery store) can seriously harm your budget.

I have this problem, too. Whenever I go to the supermarket I want to buy something from each aisle even though I’ve only come in to buy the essentials. However, I’ve started making a list before going (instead of just remembering what I need) by assessing what I really need.

I’ve had to practice self-restraint so I don’t buy that box of Oreos I really don’t need that day. Once I’m out of the supermarket I completely forget about those Oreos. For the sake of my own sanity I put a box on the list every now and then.

Also, everyone knows that you should not go hungry when grocery shopping. It only increases the impulse buys.

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Take care of your teeth

When mentioning small ways to help save big this one always comes to my mind. I can only say it in retrospect because I’ve made the mistake of not looking after my teeth when I was a kid, and have had to pay dearly for it.

We all know how expensive dentists can be. I’ve experienced it recently when I’ve had to go and have my whole lower jaw fixed, tooth by tooth. Several visits to the dentist later and I’ve realized that I’ve paid over $10,000 already, and there are still some upper-jaw teeth to fix. The dentist explained to me that this situation could’ve been avoided by taking daily care of my teeth (which I refused to do when I was young).

Brushing after every meal, removing stuck pieces of food, and getting regular check-ups (which are not expensive) can help you prevent that big expenditure later on. I’m not saying that you will never have to fix your teeth, but fixing them while the problems are small will certainly cost less than having to redo them all from scratch.

Invite your friends over to your place

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    Humans have to socialize. It is rare for people to go on for months or years without seeing another person. We simply have to meet up with friends, as without them life can get pretty boring. This means we have to go out for drinks, a meal, or a cup of coffee.

    What we don’t realize- or we do, we just wish to ignore it- is that having a drink in a club costs at least twice as much as having it at home. Getting a beer can cost upwards to $6, while a visit to the supermarket will have you pay $3 for that same beer. (These are not actual prices. It’s just simplified to make a point.)

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    Next time you want to meet with your friends, why not invite them over for a home-cooked meal and a pair of bruskies? You’ll still socialize but it will not be an expensive endeavor as going to a pub or a restaurant. This does not mean that you should never go out, but think of every night out as one more hole in the sieve. It’s better to plug some of them than none at all.

    Walk more (or use your car less)

    Having a car has become less of a social status symbol and more of a necessity in the 21st century. We take a car to take out the trash or go to a grocery store just around the corner. Each time we start a car we spend gasoline. Although oil prices have been dropping at an alarming rate for the past two years, gasoline is still expensive- just not as much as before.

    Having lived abroad for a year without a car I’ve realized that I don’t really need it as much. I was able to walk everywhere. The places that were more than half-an-hour’s walk were reachable by bike. Both walking and cycling are powered by two things– your legs. Your legs are not burning expensive fuel. They are burning body fat. All you need is to eat something. Aside from saving money you will be able to enjoy the scenery.

    (Note: This paragraph does not count if you are a Venezuelan. The Venezuelan government subsidizes gas prices for the locals and makes it extremely cheap to drive a car.)

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    Save on your mobile phone service

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      Mobile phones have, like cars, become a part of our everyday life. It is great to be able to reach someone, no matter where he or she is, and to be reached. However, providers charge us for whatever they can think of and then there’s the cost of a new phone every now and then (when your old one breaks).

      Saving the money on your phone can include anything from not talking as much over shopping around for deals and not getting a phone with your contract. Actually, the last one is one of the best ways to plug a hole (and this one is actually not so small). Getting a SIM-only contract can reduce monthly fees up to 50% (depending on the provider).

      Also look for loyalty deals and do not be afraid to threaten to leave for another company, if the current one is not giving you something better. There are also numerous other ways to save money on your mobile phone service but for the sake of brevity I am only mentioning a few. Saving a small amount each month will amount to something tangible after a period of time. Your financial well-being largely depends on your everyday decisions. Even those that seem like not much of a harm can make a difference at the end of the month. You do not have to be completely frugal when it comes to spending, but a bit of self-restraint goes a long way. Get informed and don’t just take everything for granted. Chances are you’ll be on your way to financial freedom and no debts without even realizing it’s working.

      Featured photo credit: https://pixabay.com/en/money-card-business-credit-card-256319/ via pexels.com

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      Aleksandar Ilic

      Blogger, Social Media Butterfly, Guitarist

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      Last Updated on August 20, 2019

      How to Set Financial Goals and Actually Meet Them

      How to Set Financial Goals and Actually Meet Them

      Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

      In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

      5 Steps to Set Financial Goals

      Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

      1. Be Clear About the Objectives

      Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

      It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

      Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

      2. Keep Them Realistic

      It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

      It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

      3. Account for Inflation

      Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

      Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

      For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

      4. Short Term vs Long Term

      Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

      As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

      More on this later when we talk about how to achieve financial goals.

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      5. To Each to His Own

      The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

      It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

      By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

      11 Ways to Achieve Your Financial Goals

      Whenever we talk about chasing any financial goal, it is usually a 2 step process –

      • Ensuring healthy savings
      • Making smart investments

      You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

      Ensuring Healthy Savings

      Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

      This is the focal point from where you start your journey of achieving financial goals.

      1. Track Expenses

      The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

      Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

      2. Pay Yourself First

      Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

      Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

      The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

      Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

      3. Make a Plan and Vow to Stick with It

      Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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      Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

      At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

      Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

      You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

      4. Rise Again Even If You Fall

      Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

      If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

      Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

      All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

      5. Make Savings a Habit and Not a Goal

      In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

      Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

      Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

      If you are travelling buff, try to travel during off season. Your outlay will be much less.

      If you go out for shopping, always look out for coupons and see where can you get the best deal.

      So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

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      6. Talk About It

      Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

      Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

      7. Maintain a Journal

      For some people, writing helps a great deal in making sure that they achieve what they plan.

      So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

      Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

      When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

      At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

      Making Smart Investments

      Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

      8. Consult a Financial Advisor

      Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

      Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

      9. Choose Your Investment Instrument Wisely

      Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

      Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

      Do you remember we talked about bifurcating financial goals in short term and long term?

      It is here where that classification will help.

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      So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

      10. Compounding Is the Eighth Wonder

      Einstein once remarked about compounding,

      Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

      So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

      Start investing early so that time is on your side to help you bear the fruits of compounding.

      11. Measure, Measure, Measure

      All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

      If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

      If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

      Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

      The Bottom Line

      This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

      As you can see, all it requires is discipline. But guess that’s the most difficult part!

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      Featured photo credit: rawpixel via unsplash.com

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