We've all thought about that magical amount of money that would give us financial freedom. "If only I had Elon Musk money..."
Earning an imperceivable dollar amount is the dreamer's approach to getting a hold on your finances. But there are several practical steps you can take to feel less beholden to money. Follow these five realistic tips to reach financial freedom this year.
Stick to your budget
We're not really offering up any new information here. You've signed up for Mint. You plugged in your financial information. And you haven't looked at it since — *checks calendar* — Meryl Streep's last Academy Award win.
About two-thirds of people have created a budget at one time or another, but only about one-third of the people who have a budget actually maintain it. Your goal should be to become one of those people.
Whether you use the 50/30/20 budget, zero-based budget or another approach is up to you — as long as it works and you stick to it.
Pay off your credit cards in full
Building wealth is a tough task if you're caught in a cycle of debt. Student loans, car payments, mortgages, and other installment-based loans are hard to avoid, but they're typically predictable with fixed rates and terms, so you know how much you owe each month and when you'll be done paying. Plus, they generally have lower interest rates than credit cards.
Credit cards are a different animal. Of course, you want to pay at least the minimum each month, but you're not getting much closer to debt-free living if you swipe/tap/insert your card for every purchase. Try to treat your credit card like you would a debit card by only spending what you have in your bank account. This way, you can pay off debt in full each month instead of carrying a balance and owing interest.
Increase retirement contributions
If you're already contributing to a 401(k), IRA or other retirement fund, that's a great first step. But you want to make sure you're maximizing your contributions. If your employer-sponsored 401(k) offers a company match, contribute at least enough to get that match.
Become a boring investor
In other words, stay away from GameStop stonks. Much like politics, the stock market is supposed to be boring — though it may be hard to remember a time when either was a snoozefest.
Think of being a boring investor as being a good investor. Keep it simple. Contribute on a regular basis, diversify your portfolio instead of putting all your eggs in one basket, rebalance automatically once a year or so to avoid having a riskier portfolio, then leave it alone. If you try to get cute by finagling your investments, you're more likely to spoil your returns.
Look forward, not back
You can't change the past. Make your money moves based on the future. Think about the long-term strategies you want to employ in everything you do financially, whether that's investing, saving or paying down debt.
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Original Source: 5 Tips to Achieve Financial Freedom in 2021
