How to achieve financial freedom in the next 5 years?
Achieving financial freedom in the next 5 years means following a proper financial plan to generate more income through various methods. Earn through affiliate marketing, content creation, cryptocurrency or starting any online coaching/consultation classes. It depends on your skills and passion.
Inflation is eroding the power of the dollar as future inflation is estimated at 3.00% in the US in 2030. It will ultimately impact our living style by affecting our purchasing power. Inflation, monetary or fiscal policies are beyond our control, but our personal financial planning for the future is in our reach.
Obviously, the concept of financial freedom varies from individual to individual; however, the purpose is the same: to break the shackles of the poverty around you. Realise one thing: getting a degree, reading a Barefoot investor or a good pay packet won’t enable you to achieve financial freedom.
You can get counseling from an experienced financial advisor to set clear financial SMART (Specific, Measurable, Achievable, Relevant, Time-Bound) goals, create a budget to support them, automate savings/investments and schedule regular reviews to adjust your plans.
Let’s discuss some of the most practically impactful steps to achieve financial freedom.
5 Steps to Achieve Financial Freedom in the next 5 years
1. Set Clear Financial Goals:
Honest self-assessment is important for setting SMART goals. Analyze your current finances at the moment. Saying “I wanna save more money” is a vague goal, and “I wanna establish myself as an expert affiliate marketer” is an achievable and specific goal. So, define your financial goals you can achieve in the next 5 years.
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Mentorship is necessary for managing your cash flow, controlling your debts and fixing the financial mistakes. So get help from an accredited life coach or any financial advisor. Set your short-term, intermediate and long-term goals, track them and create a budget.
2. Make a Monthly Budget:
Developing a monthly budget is important for mental clarity. The budget plan lets you see how your income and spending line up. Start with your take-home income, and organise fixed and variable expenses. Then, add line items for your savings goals.
Do you need to find places to cut to cover necessities or meet savings goals? You may want to consider setting specific—and realistic—spending limits for each category of expenses.
3.Pay off Credit Cards Due in Full:
Debt is an enemy to financial independence. Get rid of it before anything else through pay off credit cards due in full. It means you carry no debt over to the next billing cycle.
Always aim to improve the credit utilization ratio. In this way, you won’t pay on the internet on unnecessary purchases, which could save you a substantial amount of money in the long run.
Always track your spendings by recording every dollar either using an app like EveryDollar, You Need A Budget (YNAB) & Goodbudget), notepad or a spreadsheet. Review your bank and credit card statements, and categorize your expenses.
Setting your budgeting limitations will enable and help you to reach your financial goals.
4. Get a Financial Advisor:
To develop your foundational skills or get better financial advice, do consult a financial advisor for professional guidance to achieve financial freedom in the near future.
Before committing, you should interview several candidates, verify their credentials, and understand their compensation structure.
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5. Monitor and Improve Your Credit Score:
Monitoring and improving your credit score is a non-negotiable part of our 5-year financial plan. The credit score is key to unlock the lowest interest rates on major purchases like car loan or mortgage etc.
“Watch your Score” is a disciplined effort to save unnecessary expenses. Dedicate a time in a month to pay all your bills on time, keep credit card balances low (ideally under 10% of your limit). Follow this consistently for more than 5 years to gain maximum flexibility and buying power for future goals.
Always check your credit score without impacting your credit. Regularly update your score to tell what has changed. The credit number is, basically, a snapshot in time of your credit history.
The lenders consider it to determine how likely you are to repay the loan in the near future. In a typical scoring model, your score generally ranges from a low of 300 to a high of 850. The higher the credit score, the better a borrower looks to potential lenders.
Users who successfully achieve their plan goal improve their score by an average of 30 points or more. So, it is recommended to always check your score regularly to keep track of your credit activity.
Conclusion:
Imagine being able to afford your dream home, living in your ideal suburb and ticking items off your travel bucket list – without joining the daily grind at the workplace. Make this possible through budgeting by keeping finances in control.
Budgeting, saving and debt management are some of the basic foundational skills so focus on learning them. Regularly update yourself about broader financial news and trends. You can take professional guidance from the financial advisor.
After learning and evaluating your financial situation, you would be able to build a routine to adapt as per the changing economic conditions. You’ll be able to work towards your short and long-term goals with a successful financial plan to serve as a roadmap. It will provide guidance and track your progress over time.
If you have debt, manage it strategically and wisely. Always plan to start early investments for a better future along with a solid plan for retirement.