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Unless you’re lucky enough to win the lottery, achieving financial freedom isn’t easy. It takes time and hard work, requiring many years of dedication. Set yourself on the right path with these crucial steps to financial freedom.

Step 1: Set Your Goals

Financial freedom can mean something different to everyone. To determine what it means to you and the goals you should be setting, consider the kind of lifestyle you want to live. Saving up enough cash as a safety net is a great place to start.

Wherever you are in the financial and lifestyle scale, having a clear idea of what it means to achieve financial freedom will help you create a blueprint for achieving it. Making enough income to afford a certain lifestyle is doable, although never having to work again for the rest of your life while still living comfortably could be your ultimate goal.

Step 2: Educate Yourself

How much do you know about your own finances? Managing money will be easier if you’re financially literate. The more you know, the better equipped and confident you’ll be with handling your finances. Don’t let those obscure financial terms confuse you.

Financial literacy is a learned skill and not commonly taught in schools, so you may need to do your own research. You can learn a lot from financial wellness blogs, listening to podcasts and attending local seminars.

Step 3: Pay Off Debt

Having as little debt as possible is essential for financial freedom. Start by calculating how much debt you’re in and determine what sort it is. As opposed to low-interest or no-interest debt, high-interest debt should be your priority to pay off as it costs you the most.

Credit cards, cash advance loans, auto loans and store cards are examples of high-interest debt. Student loans, home equity loans and mortgages are common low-interest debts.

Step 4: Start Investing

It’s important to learn the different ways to invest your money early on. To help you decide which type of investment is right for your goals, learn more about your options below.

  • Bank and term deposits – How this works is you invest an amount of money with your bank for a fixed period and then you earn interest. Interest can be paid on a monthly, quarterly or annual basis.
  • Bonds – You loan your money to a company or the government, which will provide you with a fixed return that’s usually higher than what a typical bank offers.
  • Shares – If you buy a share, you buy a piece of a company. As a shareholder, you’re entitled to a portion of the company’s profits.
  • Managed funds – A managed fund consists of multiple shares pooled together, which your investment is spread over.
  • Property – This involves buying a property and renting it out to pay the mortgage. Property investments may provide you with income from the increase in value over time.
  • Business – Buying into an existing operation is a high-risk investment. It’s important to understand all the details about the business before investing in it.

Talk to a broker or financial adviser to be walked through these investment options.

Step 5: Track Your Spending

You don’t need to painstakingly write down every expense and purchase into a spreadsheet. There are budget apps and online platforms that can track every transaction going in and out of your account. This will allow you to categorise your spending and get an overview in simple graphs and diagrams. Set budgets for each category and get real-time updates on whether you’re going to stay within your monthly budget or not.

Step 6: Evaluate & Make Changes

Monitor your progress as you work through the previous steps to financial freedom and make changes if necessary. If something isn’t working, try a different tactic. It might take time to find the right pathway to financial freedom, but your hard work and perseverance will be worth it in the long-run.

Building a life of financial freedom requires discipline and delayed gratification — sacrifice now in return for more choices later in life.

Discover more financial advice on the Cigno blog.

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.