Financial Freedom

Financial freedom means being able to meet your financial commitments from your earned income and have enough left to do the good stuff in life –  vacations, hobbies and treats for the kids.

Financial freedom is not about having no debts. It is totally crazy and unrealistic to think that you will never be in debt. Unless you are fortunate enough to be born into wealth then chances are that for a large part of your life you will have a mortgage and car financing. The secret to a happy life is being able to manage the debt you do have and to make sure you plan for the future so that one day that debt will be paid off – for most of us when we get towards retirement.

To be in this position involves planning and discipline but not to the point where your life is dominated by thinking about money. 10 simple rules will see you through.

1. Think long term

You may just be setting off in life but think of the future and live to your means now and in the future. When you choose a career think how your salary may change over time – this should influence the amount of debt you take on. Be realistic – if your salary is not going to change much other than raises in line with inflation then don’t take on an enormous mortgage.

2. Only borrow large amounts

Sounds crazy doesn’t it? Wrong. Never borrow money for anything other than a house or a car. These things you can’t save up for realistically. A new coat you can.

3. Credit cards are for on line purchasing only

Credit cards are useful for buying things on line so you will need one. Do not use them for borrowing money though – if you can’t afford an item don’t buy it. Get into this habit early in life otherwise you will have many years of paying for stuff more than once.

4. Shop around

Be realistic. Saving a few pennies on bread isn’t going to change your world. Saving money on your car insurance and getting a better rate on your mortgage is worth a lot. There is satisfaction in getting good deal on all your shopping of course but don’t sweat everything – your friends will think you are mean.

5. Have a rainy day fund

You should always have a little something put aside just in case (to keep you from those credit cards). Cars breakdown, roofs get leaky, the girl or boy of your dreams turns up and may need whisking off to paradise.

6. Have a budget and stick to it

Set a realistic budget and stick to it. If you set a budget and keep breaking it go over it and if it’s too stringent change it – you’ve got to live within your means but you’ve still got to live.

7. The meaning of life

No one knows what this is but there aren’t many psychologists or churches that believe the answer is through the accumulation of wealth or material possessions.

8. Save

Save regularly no matter what the amount. When you’re young you won’t save much but you’ll be able to save more later on in life. Saving is a muscle and like all muscles it requires exercising. Exercise its best done little and often and from an early age. By the time you hit middle age and you’re earning more you’ll be putting more away by reflex.

9. Use inheritances wisely

If you are bequeathed some money think how it can affect your life goals. A few thousand dollars from a favourite aunt could put a dent in your mortgage and save years of interest.

10. Keep records

Keep your finances tidy and up to date. Check off receipts, make sure your budget is up to date and check previous paperwork for anything you buy on an annual basis – insurance and so on. Also, keep checking interest rates on any borrowing or saving accounts and change your banking suppliers if necessary.