7 effective ways to financial freedom

Did you know? Close to 3 in 5 Australians are worried about their financial situation and almost 85% say financial stress affects their well-being negatively!

Financial FOMO is real. It’s the virtual equivalent of keeping up appearances. Look around you. Look at your Facebook feed. Many are feeling the pressure to ‘keep up with the Jones’ and show off their lifestyles on social media to look like they’re doing well. And it’s sending many people broke!

Want to get savvy with your finances?

Here are 7 ways to help you get financially fit and eliminate the money habits that sets you back

  1. Save 10% of your earnings

If you can’t make more money, doesn’t it make sense to use your existing source of income that you already have? Let’s put it another way, for every $10 that you earn, put away $1. You’ll be surprised that you’ll eventually manage to get by on 90% of your income just fine.

What do you desire the most? Trendy clothes, that expensive watch, maybe that fine dining experience at Heston Blumenthal’s restaurant; things that are quickly gone and forgotten? Or is it that dream home, that piece of land that overlooks the ocean, or that investment property that brings in rental income? The 90% that you spend brings the first. But it’s the 10% that you save that brings in the second.

  1. Control your expenditures

Print out your bank statement and have a proper look at your expenses. There’s nothing more eye-opening than going through your statement line by line. Some of us earn more than others. Some have much larger families to support. But somehow, earnings are so easily spent and some have no money left in savings?

It’s an unusual truth that our ‘necessary expenses’ will always grow to equal our incomes unless we intervene. Cut back where you can and watch your savings grow automatically.

  1. Make your savings multiply

Money in your wallet is nice to look at and makes you feel good, but it earns nothing. Now that you have saved 10% and cut down on your expenses, it’s time to put your money to work. Start with a high-interest online savings account or a term deposit. Check out some new apps designed to motivate you to save.

Your wealth is not the amount you carry in your pocket but it is the income that it builds that continuously flows into your pocket. This is the magic that is compound interest. It’s how you make your money work for you, even when you’re asleep.

  1. Set aside an emergency fund

Sometimes things don’t go the way you want. You lose your job, car needs repair, or the hot water tank blows up. Life happens. You’ll be glad to know that you have some money set aside to deal with it. A rule of thumb is to set aside between 3 to 6 months of living expenses.

  1. Start saving for retirement

When you’re in your 30s and 40s, the majority of your income tends to be directed at paying off your mortgage and funding children’s education. We tend to live in the now and not in the future; retirement and old age is hard to visualise. Why put off till tomorrow what you can do today, by making additional contributions to superannuation by salary sacrifice or after-tax income is a form of forced savings. Ask yourself this question: how will you and your family live when you are no longer able to earn?

  1. Revisit your overall financial position at least once a year

Are you on the lowest interest rate for your credit card? Is your superannuation account charging too much fees and can you do better?

  1. Seek advice from a professional financial planner

Consult the experts. A good financial planner will help you set your financial goals and work with you to create a plan to achieve them. When choosing an adviser, you’ll want to know if they have the right qualifications and experience, that they participate in regular training for ongoing professional development and whether they are a member of an industry association.

Your Turn

If you really are suffering financial FOMO remember not all that glitters is always gold. Be a master of your own destiny and create a plan that will allow you to live the life YOU want to live and forget about keeping up with the Jones’s!