4 Helpful Tips To Achieve Financial Freedom
Let’s talk about financial freedom. What it means. What it represents. Why it is so incredibly powerful. Ever since my husband and I got married, almost 9 years ago, we have always felt a common thread with regard to our long term finances:
The desire to achieve financial freedom. To us, that means not being required to work.
There is something incredibly powerful and liberating about financial freedom. It is being completely free to do whatever you want. You do not have to clock in, you do not have to answer to anyone, you can just do what your soul desires. What a beautiful thing. Luckily, my husband and I are both frugal by nature, and equally passionate about early retirement, so that has been a blessing.
I think there are 4 main reasons why we are pacing for early retirement (our current goal is age 50). Our financial prudence started in our early twenties, which was over decade ago (I am 35 years old as I write this.)
I love sharing about our journey and our choices because we have never made crazy-high incomes. We have just committed to making sound financial decisions within our budget.
Here are four things we’ve done, and continue to do, that keep us on the straight and narrow to achieve financial freedom:
1. Invest early
This move was huge. We started investment in our 401ks in our first jobs after college. Those initial years of investing are very much showing the value of compounding interest. The most we have ever invested in retirement is 15%, and the least we have invested is 9% (this is our current rate, hello parenthood!) We turned the “investing faucet” on early, and we never turned it off. We have had to dial back our Roth IRA investing, but we knew that if we turned the faucet off completely, the likelihood that it would come back on was slim.
Our advice: Start investing in retirement as SOON as possible. Turn the faucet on, and do not turn it off. Compounding interest is incredible (here is a simple calculator to try out some scenarios for yourself).
Watch out for: It is easy to want to turn retirement funding off for a bonus payment or that side hustle, but the higher percentage you invest of your total income, the better off you will be.
Disclaimer: I am not a financial advisor or accountant. Please consult with the appropriate professional to make the best decisions for your financial scenario.
2. Buy a house you can afford
We have purchased two homes in our life, one in 2009 and one in 2012. In both of those purchase years, the market had bottomed out. We bought our homes for cheap, which was lucky. But, one thing remains true: we bought within our means. Some would argue we bought below our means. And I love that. We were frugal with our house budget and now we aren’t drowning in a huge mortgage.
Our advice: Buy within your means. Do not try to keep up with the Joneses. Do what makes sense for you and your life. Also, try to air on the side of less square footage. A smaller home means less to clean, maintain, repair...did I mention clean?!
Watch out for: Exciting offers! Being a homeowner, with even a little bit of equity, means you have options. You will get letters from people wanting to buy your house for cash, or from your lender giving you ALL that equity in exchange for a new mortgage with the same monthly payment. Don’t kick the can to your future self!
3. Pay cash for your cars
Cars can be a huge burden on your finances, especially if you have fixed payments. Paying cash means you completely own your car from day one. That is incredibly freeing. And we’re all about freedom over here. Historically, we have paid cash for used cars. In 2021, we bought our first new car, but we paid cash. There are a lot of opinions around financing cars, but I think the bottom line is to stick to your budget and stay focused on your goals so that you can achieve financial freedom.
Our advice: Pay cash for your car, and buy a car you can afford. Getting overextended in a car is not where you want to be.
Watch out for: Car envy! It is real. Every year cars are newer and “better”. You will see your friends and neighbors with new cars and can trick yourself into thinking you need one because of better fuel economy or better safety. You probably don’t need it. Eventually, all cars need to be replaced, but you probably aren’t there.
4. Use credit cards responsibly
We have always used a credit card to pay for our everyday expenses, because we like getting credit card points and then redeeming them for cash. But, we always pay our cards off. We never carry a balance. I think credit cards can be dangerous, but they can also be a great tool if used correctly (read: rewards points and the ability to float a purchase while you move cash around).
Our Advice: Be careful with credit cards. They typically have super high interest rates.
Watch out for: Yourself. If you have had trouble with credit cards before or feel like they are something more than a small step between your purchase and your checking account, consider cutting them up and staying away.
That about sums it up. No magic tricks, no crazy market strategy, just good old fashion self-restraint and patience.
I think financial freedom is all about choices. Maybe we will want to work until we die, maybe we will want to totally change our careers, maybe we will want to take a sabbatical (or a second one, in my case). We don’t know exactly what the future will look like, but we DO know that we don’t want our current income holding us hostage to a job we no longer like or a city we don’t want to be in.
Financial freedom means different things to different people, and that’s ok! I hope the tips above have inspired you to pave YOUR unique path to freedom.