Forge a Path Toward Financial Freedom With These 7 Smart-Money Steps

If you’re like most Americans, you likely associate early July with Independence Day, when we celebrate our nation’s hard-earned freedoms with fireworks, barbecues, and other red, white and blue-infused festivities. But believe it or not, the Fourth of July isn’t the only seventh-month celebration that pays homage to freedom. There’s another (albeit much less familiar to most) observance that kicks off July by drawing attention to a more individualized form of independence.

Marked each year on July 1, National Financial Freedom Day is designed to highlight the importance of Americans achieving financial independence. To some, this might mean being able to cover life’s expenses without needing money from others, or it might entail becoming completely debt-free. For others, it might extend all the way to being capable of maintaining a desired lifestyle without having to work a full-time job. But even though financial independence can have different meanings to each of us, the steps to financial freedom tend to be similar for most people.

7 steps to financial freedom

Wondering how to become financially independent, and want to take your own strides toward financial freedom? Consider taking these seven smart financial steps to get moving in the right direction:

  1. Map out your financial goals: To achieve your financial goals, you first must clearly understand what they are and how you plan get there. So to begin your journey toward financial freedom, take the time to identify and define your leading money-related objectives, and set a basic strategy for achieving them. The financial goals you set should be SMART — specific, measurable, achievable, relevant and time-bound — and this article offers great tips on setting yourself up for success in achieving them.
  • Track and understand your finances: By monitoring and analyzing how your money comes and goes each month, you’ll be able to gain insights about the areas in which you can cut your spending — then look to devote any newfound surpluses toward achieving your financial objectives. Whether you go the old-fashioned route using pen and paper, opt to fill out a spreadsheet or decide to let a money-tracking app do the bulk of the work for you, try to identify any areas where you may be able to trim back and eliminate unnecessary spending.
  • Build a budget: Creating and sticking to a budget is one of the most powerful ways people can take greater control of their spending, cut down on their non-vital expenditures — and devote any newly freed up money toward saving and other top financial goals. When sorting out the X’s and O’s of your household finances, consider following the 50/30/20 rule, which calls for devoting 50% of your after-tax monthly income to needs, 30% to desires, and at least 20% to savings and debt payoffs.
  • Pay down debt: Sizable amounts of debt — and especially high-interest debt — can serve as a huge impediment to achieving financial freedom. And by paying off your debt as quickly as possible, of course, you can cut down on the amount of interest you pay and effectively get to keep more of the money you make. When planning to pay down your debt, consider employing one of the two leading debt-payoff strategies: the debt snowball method and the debt avalanche method. The debt snowball method prioritizes cutting your number of debt balances as quickly as possible, while the debt avalanche method aims to eliminate your highest-interest debts first. Whichever route you choose to take, paying down debt can help you improve your credit score, reap the benefits that a good credit score can bring … and take strides toward financial freedom.
  • Create a diverse investment portfolio: One of the most effective ways to build wealth (and financial freedom) for the future is to develop streams of passive income — money that you earn without having to work for it. And one of the leading strategies for achieving this is to route as much of your active income (the money you earn from your job and other work) as possible to investments such as stocks, bonds, real estate and certificates of deposit. By creating a diverse portfolio that includes a strong mix of higher- and lower-risk assets, you can aim for growth while protecting yourself against any potential value downturns among any of your individual investment assets.
  • Increase your income: Another way to increase the amount of money you can devote to achieving your financial goals, and ultimately to achieving financial freedom, is to (of course) make more money. And in addition to earning promotions and raises at your current job or seeking out and procuring a better-paying job, another way to make this happen is to take on side jobs. Other ways include starting a small business, selling off no-longer-needed belongings and finding ways to turn your hobbies into added income.
  • Step up your savings: The steps outlined above should all help you free up extra money each month. And by devoting as much of it as possible to your savings, you can get closer and closer to achieving financial freedom — however you may choose to define the term. Whether it’s building an emergency fund, saving for retirement, creating a kid’s college fund or something else, the more you can set aside the closer you can get to making financial independence a reality.

At The Southern Bank, we pride ourselves on offering friendly, personalized service to all of our customers — and that includes providing guidance when you have questions about any of our banking services. To learn more about our Personal Banking services ranging from Personal Checking and Personal Loans to Savings & Money Market, Certificates of Deposit (CDs), Mortgages and more, check out the Personal Banking page on our website or visit one of our local branches for friendly, in-person service with a smile.

Member FDIC, Equal Housing Lender