If you’ve followed the personal finance community for long enough, you’ve probably heard the term “financial freedom.” The words themselves are alluring but not well-defined because there is no single picture of what financial freedom looks like. Ultimately, financial freedom is the ability to make life decisions without worrying about money.
How can you create more financial freedom?
Define what financial freedom means for you right now
Financial freedom means something different to everyone and your own definition of it may change over time. Ask yourself the question of what feels like financial freedom to you right now. It could be becoming debt free, starting your own business, or cutting back your hours at work. Depending on what your definition of financial freedom is right now, you might want to focus on the following actions:
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Make a plan to pay off debt: Debt is an obligation, and because of that, it can make you feel trapped. Removing debt from your budget frees up money for other things you care about. The first step is to consolidate all your balances, minimum payments, and interest rates in one place. From there, you can decide how you want to want to move forward with paying down your debt. (Read 8 Strategies for Breaking the Debt Cycle Part 1 and Part 2)
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Start saving for your emergency fund: Having an emergency fund will noticeably increase your financial freedom—so much so that some people like to call their emergency fund their “freedom fund” instead. You’ll be able to make decisions independent of what your next paycheck brings (i.e. breaking the paycheck-to-paycheck lifestyle).
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Save for experiences or things you want: Being able to spend money on experiences or things they want is a form of financial freedom for many people. If there is a specific purchase you want to make, set up a separate savings account for it and a recurring contribution. Enjoy your purchase because you earned it (and planned for it!).
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Up your retirement game: Retirement is often held up as the ultimate financial freedom goal, but it takes most of us decades to reach. In the meantime, expand your knowledge of retirement accounts and how they work. Start by learning about the benefits your own workplace offers or exploring a Roth IRA.
Acknowledge where you’re starting from
Even though financial freedom has no single “end goal,” when you look around at the financial freedom that your friends, family, peers, or random influencers on Tik Tok have, you might feel like you are starting from behind. And it’s true that we do not all start out on an equal playing field—some people get a leg up from generational wealth, access to quality public services, affordable education, or networking connections. Acknowledging that can help you stop the comparison game and focus on your vision of financial freedom.
Increase your financial literacy
Financial literacy is a key part of financial freedom because it helps you better understand how our financial systems affect your life. With that information, you can make decisions that bring you closer to financial freedom. Financial literacy also helps you recognize what financial freedoms you have when you have them. There is a lot of free financial literacy available through library books, podcasts, and online resources. If you need more targeted financial literacy help, working with a financial trainer could be worth it.
Advocate for removing hurdles to financial freedom
No one gains financial freedom in a vacuum. Your workplace, community, and government can have a major impact on how easy or difficult it is for you to gain more financial freedom. If you see policies or procedures that are holding you or others back from gaining more financial freedom, advocate for change. This could look like advocating for:
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A more transparent promotion process, ending waiting periods to contribute to a 401k, or more comprehensive healthcare coverage at your workplace
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Affordable housing, public transit, and quality education in your community
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Advocating for fair tax policy and consumer protections at the governmental level
Align your money with your values
Aligning your money with your values can mean spending less on what isn’t important to you so you have more to spend on (or save for) what you care about most. This increases your financial freedom by streamlining your spending and making sure you get the most value from it. It also means supporting causes you care about—whether that’s buying from small businesses rather than giant retailers or setting up a recurring donation to your favorite non-profit.
