Financial freedom is a goal we should all aspire towards. However, what does it mean to be “financially free”? It can mean a lot of things for different people, but for me it means to have 0 debt and about a years income in savings, and working towards a retirement fund. But in my current situation, that is just a pipe dream. So, I’ve put together a few steps I’m going to begin taking in 2020 to start my journey towards being financially free by 2030 (if we’re all still alive, that is…).
5 Steps To Financial Freedom
Step 1: Pay off all immediate debts
I will be honest, I’ve been a little silly and let a few debts pile up. With getting a credit card to build a credit score, and opening my Paypal Credit account so I could pay off my phone, I’ve accumulated a bit of debt. But, I have a budget and a plan in place to pay these debts off so I can allow myself a little extra money in 2021. After all, a year is only 12 months. I’ve worked out if I pay £200 a month (gradually decreasing throughout the year) I will have all my debts paid off by January 31st 2021. I look forward to seeing that day.
Step 2: Save up a £1,000 emergency fund
This will be something I’ll allow myself to dip into if and when any emergencies come up such as needing to move, the fridge breaking, or something disastrous. I’d like to have £1k saved so I know I could cover most bases without having to break into my paycheque.
This won’t be something I can achieve 100% in the next year, but I can begin by putting money away.
Step 3: Pay bills yearly rather than monthly
This obviously depends on the bill and how much I’m getting paid. I’d like to leave myself a little bit of money after bills for food and general spending. If I can change the payment dates and spread them out more throughout the year too, that would be fantastic. If I can pay bills yearly, that would leave me with (mentally) more money 11 months of the year rather than having a chunk eaten out of my budget every month.
Step 4: Have 6 months worth of expenses saved
Saying that, I would like to save up 6 months worth of expenses. This means doing a little bit of maths and adding up what this means in terms of:
- Food shopping
- Gas and electric
- Council tax
But, I think it is doable in the long run and it will provide me with a financial safety net should anything go haywire.
Step 5: Put away 10% of my income each month towards retirement
In the UK, we have to pay in towards our National Insurance, which then provides us with a state pension at retirement age. However, I’d like to have my own private pension saved too just in case I decide to retire early. You never know. 10% obviously fluctuates and means differently depending on if I get a pay rise, but this is the goal and it keeps things fair.
Overall, these are things I can begin to work towards in 2020. I can easily work on step 1, which then leads me into a position to start step 2 and so on. I feel like 5 steps over 10 years is a decent plan, it doesn’t give me too short of a timeframe and it isn’t so drawn out I’ll forget about it either.