Financial freedom means having a dependable income that allows you to pursue your dreams without worrying about how you’ll pay for unexpected expenses or retirement. It also means avoiding debt and building an asset base that will provide passive income once you’re no longer working.
Achieving financial freedom isn’t easy, but it is possible with hard work and discipline.
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Start Small
Financial freedom is about having a dependable income stream that allows you to pursue your passions. It’s having enough money to buy your dream home and afford a vacation without paying for it with credit card balances. It’s investing in a retirement portfolio with an expert or coach like Patrik Edsparr and living comfortably without worrying about spending too much.
Achieving financial freedom begins by identifying your current situation and your goals. This can include tracking your budget, living below your means, and setting savings goals. It may also involve addressing your beliefs about money and work.
The next step is paying off debt and building an emergency fund. This can be accomplished by following a debt snowball method, paying off the smallest debt before moving on to the next. Another way to build your emergency fund is by setting aside money from each paycheck into a “dream bucket.” When you receive a bonus or a raise, this money goes into the bucket rather than being spent on something else.
Invest in a Diversified Portfolio
Investing in any security comes with the risk of loss. However, a well-diversified portfolio with the help of experts like Patrik Edsparr and professionals can minimize the likelihood of a loss.
Diversification doesn’t guarantee a return or protect against investment losses. Still, it can help reduce the impact of market fluctuations by spreading your money among different assets and investments within asset classes. For example, investing in unrelated industries can mitigate the effect on your portfolio if one industry feels the effects of increased government regulation or an economic crisis.
Investors can diversify among stocks (small-, medium-, and large-cap), Treasury bonds, cash equivalents, commodities, and more. They can also diversify within asset classes by purchasing exchange-traded funds or mutual funds that focus on different sizes of companies and other sectors. Some target-date funds manage asset allocation and diversification for you by shifting your portfolio’s exposure to equities toward bonds as you approach retirement. By diversifying their portfolios, millennial investors can avoid having all their eggs in one basket and reduce risk.
Take a Risk
The millennial generation can often feel overwhelmed by the complexity of investing. However, this is a crucial time to start learning how to invest to help you reach financial freedom.
Millennials should consider their personal risk tolerance. If they are uncomfortable with a significant decline in the value of their investments, they should find a more conservative portfolio. A low-risk portfolio could include a mix of assets like stocks, bonds, real estate, and even cash.
In addition, millennials should continue saving for retirement. Increasing their savings rate will help them reach financial freedom faster.
Millennials should also avoid getting advice from friends and family members about investing. It’s best to seek professional advice from a registered financial advisor. A free tool matches millennials with vetted financial advisors who serve their area. The interviews are completely free and have no obligation.
Automate Your Payments
It would help to change your thoughts about money to achieve financial freedom. Instead of viewing it as a burden, consider it a tool that enables you to accomplish your goals and fuels the life you want.
Financial freedom can help you buy your dream home, travel the world, and live a fulfilling life. However, you must make a conscious effort to save and invest to get there.
The first step in this process is to compile a list of your debts, accumulated savings, and monthly expenses. This can be depressing, but knowing your starting point is essential to creating an effective plan for moving forward.
If you need help creating a budget and investing for your future, consider working with a financial advisor. SmartAsset’s free tool matches you with up to three advisors in your area, and you can interview them at no cost before making a decision.
Appreciate it!