One catchphrase that many financial experts and gurus use is “financial freedom.” A 2008 Gallup poll found that about 44 percent of Americans worry about money. Though the percentage fluctuates, this is still a high level of concern. Explore the ABCs of financial freedom so you can take steps toward achieving this goal in the near future.
1. Financial Freedom Defined
Some people define financial freedom as freedom from debt. Many people who have to pay debt feel enslaved, so getting rid of that obligation is an act of breaking free. In truth, financial freedom can be defined on an individual basis. When all is said and done, you decide what is going to give you your personal financial freedom, whether it is having a million dollars in the bank at retirement or simply paying off your credit card account.
2. Acknowledging Your Situation
The first step toward financial freedom is to acknowledge your current financial situation. Some people who have financial issues simply don’t know much about what they make, what they owe and what they spend. Set a day aside to review all of your accounts, determine your balances owed, interest rates, monthly payments and spending patterns. By taking an overall look at your financial situation, you may identify problems and potential solutions.
Creating a budget is very important if you want to achieve financial freedom. After you get a view of all of your finances, you must then place the information into the convenient format of a budget. The budget lists your sources of income in one column and all of your bills in another. Once you compare the two you can figure out how to allocate your money more efficiently or come up with a plan for how you can bring in more income.
When you’re truly financially free, you do not have to worry about your credit. You should have the funds to pay your obligations, so your credit score and history either remain stable or improve. Also, you do not have to use credit accounts unless you want to earn reward points or attain some other benefit while paying off the balances. Financial freedom means that you do not have to worry about how you’re going to pay bills or purchase the items you need.
****Written By Jade Balle, eHow Contributor updated May 06, 2011