When one thinks of financial freedom, it can feel like a very daunting task. Can I really become financially free? What does that even mean? How do I do this? Oft times, one has not been exposed to what financial freedom looks like in “real life” and only dreams of achieving this.
So, where do you begin if you are living check to check or barely making it but you know there is something better out there for you? There is a life out there that doesn’t revolve around working just to pay bills but have nothing to show for it.
You start with yourself. Be honest with yourself about your finances. Step 1 requires you to take a hard look at your financial situation and be transparent with yourself so you know where you stand. Once you know where you stand financially, you can begin to make a plan.
Take a look at your accounts. Do you have savings? If so, how much? Analyze your debts. Who do you owe and how much do you owe them? What are the interest rate on those debts? What are your monthly expenses? How much would you need to cover your household expenses, including your transportation, if you were to lose your job and you were out of income for 3-6 months?
This is exactly how I started. When I started following Dave Ramsey’s Baby Steps, I had to take a hard look at my money, and it wasn’t fun, but that was the only way to get control over my finances. I answered these questions too and scared myself with how little I had versus how much I owed and what was necessary to have in a savings account as an emergency fund for in the event I lost my income. I had about $200 in my savings account. I owed on 3 store cards – JC Penny, Kohls, and Rooms to Go. I had 3 major credit cards – Capital One, Sams Club, and Wells Fargo, and 2 student loans – 1 private and 1 federal. I also had a car payment. I had a mortgage on a townhouse that was now a rental property.
It was a sobering experience to see in black and white the hole that I created for myself; however, once I knew where I stood financially, I was able to move on in the baby steps, but you cannot plan until you know where you stand. Do you know where you stand financially on this journey to financial freedom?
Until next time, journey on!