The path towards finance freedom doesn’t have to be difficult or a struggle… In fact, it can be as easy as ABC!
AIs for… Allocate your money.
First, you’ll want to separate your take home pay into “buckets”, we suggest using the 70/20/10 Rule to accomplish this: 70% for living expenses (rent/mortgage, bills, car note, food, debt, etc.), 20% for savings (emergency fund, investments, specific savings goals), and 10% for fun!
BIs for…Budget your money.
Use a budget to track where your money is going, and to make sure you’re living within your means – that means spending less than you earn.
To do this you’ll want to distinguish your WANTS (new phone, fancy clothes, etc.) vs. your NEEDS (living expenses), and make an effort to eliminate any want that doesn’t fit within your 10% entertainment spending.
CIs for… Change your spending habits.
This last step ties everything together.
Ever month you want to make sure you’re paying yourself first by saving and investing at least 20% (or as much as you can afford) of your take home pay. This is how you will build your financial nest egg to achieve financial freedom.
Next you want pay your living expenses. If you find that your living expenses are more than 70% of your take home pay, then it’s time for you to get creative and figure out ways to lower those expenses. If you can’t, the first thing that needs to be cut is your entertainment budget, never your savings – ALWAYS PAY YOURSELF!!
Finally, anything leftover after savings and living expenses is your entertainment money. This should be the last thing your financial resources go to since conspicuous consumption won’t help you grow your net worth and reach financial freedom.
CONCLUSION
The steps towards financial freedom are simple, but will require discipline and perseverance.
If you can learn to follow a budget, pay yourself first, and to live within your means, financial freedom is yours for the taking!
