Financial Freedom

The Ultimate Secrets Of Financial Freedom

Financial Freedom is a Goal for Millions of People Worldwide. Unfortunately, Many Aren’t Properly Saving Money or Building a Solid Foundation for Future Wealth. In this Article, We Explore Several Ways to Manage Your Personal Credit, Income Streams and Credit Education Methods to Empower Your Financial Future!

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One of the most important aspects of our lives is our financial situation. The ability to responsibly handle your money, assets and debts can be a huge denominator towards your ultimate success. As such, many people struggle with providing for their future and managing their day-to-day expenditures. A 2018 study by Northwestern Mutual indicated that 21% of people have absolutely zero savings. This exposed the truth behind millions of Americans’ honest financial situation, and the caliber at which this issue exists. Most of us don’t plan for it, but many surprise expenses pop up during the year—from doctor visits to car repairs to providing for loved ones. Having the funds to overcome these situations alongside your routine income/debt flow can be essential to living a life geared toward financial freedom.

 

Below, we explore the various levels of financial freedom which one can attain, and some advice we can offer to motivate you towards those goals. Next, we discuss the biggest culprit behind the costs—your credit report and personal credit situation. We dig deeper by investigating the root causes of bad credit, and the methods by which you can fix your credit report, boost your credit score and inch closer to financial freedom. Finally, we dig deeper into the top secrets behind financial success and what has historically been proven to work. After this, hopefully you too can rise to the lifelong challenge of securing your financial future!

 

 

The Levels of Financial Freedom

What exactly is financial freedom? The term refers to the ability to have enough savings, financial investments and cash on hand to afford the kind of life one desires for themselves and their family. This means growing your savings or assets to enable you to retire earlier than expected and live contently, or pursue your passion without needing to be locked down by a set salary each year. Essentially, it means making your money work for you rather than the other way around.

We all have visions for what we desire. Perhaps you dream of buying a bigger house, or a better car? Or maybe you would like to have an inheritance to pass down to your children? These are goals for so many people that may seem out of reach, but are actually quite possible with the right amount of planning and adherence to best practices in spending and saving. Once you understand the root cause for your financial struggles, it becomes much easier to assess your situation and implement the behaviors and tools which will ensure financial freedom. Rather than being burdened by increasing debt, financial emergencies, overspending and needing to work into seniority, establish a key foundation upon which you can build slowly—while not needing to forsake a happy life in order to have a retirement fund down the road. Here are the levels of financial freedom one can achieve, and the meaning behind each step along the way.

 

Level 1 – Not Living Paycheck to Paycheck – This first level of financial freedom entails building an emergency fund for unexpected situations which arise. This may also include paying off any credit card debt as well. Realistically, millions of Americans still live paycheck to paycheck. In a report by the Federal Reserve in 2017, about 40% of U.S. households admitted they would not be able to cover a $400 unexpected expense if needed. While this seems daunting, it’s entirely possible to begin the process slowly, and in small numbers.

After assessing your current financial state, balancing costs and income along with your debts and assets, explore ways where you can set aside, say, $100 a month into a separate savings account to tap into when needed—but don’t use it routinely. From there, start to contribute $500 a month, and then $500 every pay period. You will soon start to see your debts fall and your savings increase—which will propel you to save even more.

 

Level 2 – Save Enough to Quit You Job (Temporarily)  – The whole idea behind financial freedom is being able to make work an option. Saving up enough money to quit your job forever is a huge task. Accumulating enough to take off time from work even for a bit, however, is still a huge jump in that direction. It’s a great feeling to know you can if you need to!

Imagine being able to vacation with your significant other for a month to a foreign country when you wanted, or having the ability to take time off from work without losing your income. You wouldn’t necessarily have to quit work forever, but this practice will take planning and commitment in order to make the first leap. Inquire at your workplace about retirement or 401(k) plans which can help forcibly contribute to your savings. Short term, this could also serve as an emergency fund. Use this as motivation to get to the level you need!

 

Level 3: Enough to be Financially Happy and Still Save – Saving your money shouldn’t necessarily inhibit you from living your life while you’re alive. There’s no point in being so frugal and storing away your cash to the point that you can’t enjoy yourself. Having thousands of dollars when you’re 65 will be nice, but not at the expense of your and your family’s happiness. Making small lifestyle changes however, is absolutely expected and a great way to help your lock in your financial freedom. There is immense relief when you can earn enough to cover your bills and then some, while still saving up for your future. There’s a saying: “Pay yourself first.” What this means is putting a specific amount of money away in savings before paying off bills or anything else. This extra cushion can even move up your retirement date—the key is to not spend away these extra savings, and to not increase your lifestyle while you save.

Level 4: Freedom of Time  – Most people truly desire freedom and flexibility within their schedules. That being said, freedom fo time and financial independence go hand in hand. These entail foregoing the daily endeavor to make ends meet in order to follow your passion or spend more time with your family without going broke in doing so. This could take the form of more paid time off, flexible work schedules or working remotely on occasion.

The benefits of extra time can be extremely useful, and in the right hands, earning potential. While your 9 to 5 may take up much of your time during the day, build passive income streams which operate in bringing in money even while you sleep. This way, you can have your active income streams from your day job or side gigs, as well as trade other hours of the day to live your life while simultaneously earning quietly.

 

Level 5: Enough for a Basic Retirement – There are some people who really, truly hate their job. Thie would do anything to leave—from moving to a country with lower costs of living to selling their house. What does this mean for their retirement, however?

For those seeking early retirement through financial freedom, consider what your bare minimum retirement plan would look like. Would you be able to move to a foreign country happily? Or give up going out to dinner as frequently? Maybe not, but it’s nice knowing it’s an option. Weigh your options regarding your most basic, bare-bones retirement plan, and what that would encompass in terms of current spending habits and financial behaviors. Knowing you have some money to cover some standard of living in the future will absolutely influence the life choice you make along the way. Create a monthly budget which covers your routine expenses and earnings to balance out your current financial state, and take action to cover your bases accordingly.

 

Level 6: Enough to Retire Well – Say you are doing well and have a substantial amount of savings amassed. Your current standard of living is one your are happy with…so what would you need to do to continue this same lifestyle into retirement and beyond? Building this “nest egg” in order to support your future is a huge factor in securing your financial freedom. Even better are those individuals who have accumulated plenty of assets or passive income streams in order to retire contently.

Level 7: Enough for a Dream Retirement  – Perhaps you envision an even grander version of your future for yourself. Maybe you see yourself flying first class, staying in five-star hotels or spending more time abroad with friends. These things do not come cheap, and as such, need to be truly defined as peripheral or actual factors of happiness in your life. Wouldn’t it be great if your current routine provided for a luxurious future? Nothing is stopping you!

Level 8: More Money Than You Could Spend  – This is the highest level of financial freedom. In this scenario, your financial freedom plan allows you to outlive your wealth. Building a fortune to pass down to future generations is probably the most extensive form of financial freedom, to the point where you don’t have to worry about any expenses or debts which come your way.

While this group is usually filled with those who either won the lottery, received an inheritance or founded a company (such as Bill Gates or Warren Buffet) even many of these people still live well beneath their means. Buffet, for example, has stayed in the same $32,000 house since the 1980s and doesn’t plan on leaving anytime soon. His procurement of wealth came particularly from his frugality and ability to save daily, alongside his prolific financial career. However, it was a combination of powerful earning with great spending and saving habits which led to his ultimate form of financial freedom.

 

Your Personal Credit and Financial Freedom

While saving and spending properly are crucial to building your way towards financial freedom, one of the most important factors within this system is managing your credit score and payment history to lenders effectively. This means paying off loans, credit cards and other installments on time or in advance, along with maintaining a good credit mix. Here, we explore some of the proven methods which will help reduce bad credit and boost you credit score.

 

Removing Derogatory Marks and Disputing Negative Items

After ordering copies of your credit reports from the three major credit bureaus—Equifax, Experian and TransUnion—the first major step is to review your reports and check for any inaccuracies on your profile. Pay close attention to items such as late payments, charge-offs, collections, bankruptcies or other derogatory items which are not correct. These red flags will indicate whether or not you’ve paid your monthly installments or amounts due on time and in full, or whether they have been left unchecked—and possibly erroneously listed.

 

Negative items older than 7 years (or 10 in the case of bankruptcy) shouldn’t be listed, as they should have fallen off the report after a certain timeframe (usually 2-3 years). Also ensure you don’t have duplicate collection notices listed. The original creditor and the collections agency may have both listed the item after it has got to collections—make sure the duplicate is removed! Don’t forget to check that the proper credit lines listed on your report. Sometimes lenders will try to thwart the competition by showing less available credit than actuality on your report. This can negatively impact your credit score and affect your credit mix.

 

Paying Off Accounts / Debts and Maintaining Your Creditworthiness

After checking for negative items which are inaccurate, try to negotiate with lenders to remove late payments or other such notices. Sometimes you can call and ask politely and in order to keep you as a loyal customer, they will remove it. Other times, with more serious negative marks (such as a long-overdue bill, collections or several missed payments) you can negotiate a payment in exchange for the removal of the negative item. Make sure this is established in writing with the creditor, and do not pay off a bill which has gone to collections unless the creditor agrees to remove the derogatory item off your credit report. Also do not admit fault for the debt, as that can land you in more legal trouble.

 

Pay down your bills! The golden rule of thumb is to never use more than 30% of your available credit on an account or credit card at any time. This step alone can have a huge positive impact on your score. Student loans, mortgages and the like typically have much lower interest rates, making them less volatile in your credit situation. Credit cards, however, are toxic to wealth building and can drown you in debt. Note that there are two main ways to pay off debt: the snowball method and the avalanche method. Snowball is when you pay off the smallest debts first. Avalanche is when you pay off the debt with the highest interest rate first.

 

Try not to open new lines of credit, as this will damage your score. The longevity of your accounts is a factor directly considered in credit scoring. Also do not close your old accounts, as these are what literally make up your credit history. They indicate your creditworthiness and your past with other lenders.

 

Credit Education and Planning for Your Future

After having covered an extensive overview of the levels of financial freedom and the ways to fix and boost your credit, we arrive at the main idea behind this article—the routine steps to take to ensure a successful long-term financial freedom plan. Below, we explore the goals you should set, the means to achieving them, informative credit education guides and methods that will help you save for your future.

 

Set Goals and Save Money

Begin by assessing where you are at. Compile and total up your debts, such as mortgages, student loans, car loans, credit cards, etc. Add up all the numbers (as terrifying as this may seem) and then total up all the money you have saved up—including savings accounts, stocks, retirement funds, and so on. Then add in your salary, side income streams and other such factors. This process will help you realize your overall situation alongside your spending and saving habits, or areas where you could improve. You will also start to see your cash savings rise and debts fall.

 

Start creating a monthly household spending plan and stick to it. This will guarantee your bills are paid while cost savings are within the parameters you set. This will also empower your confidence and reinforce goals you set rather than letting yourself spend away in blissful ignorance.

Be sure to set goals, this is the most important part! Define what financial freedom means to you, as certain goals can be too vague. Write down a specific amount you want in your bank account(s) along with what your lifestyle should look like and by what age.

 

Pay Your Dues, Debts and Yourself

Pay down your lines of credit. Student loans and mortgages carry lower interest rates, and as such do not carry with them same sense of urgency as other forms of credit. Remember—credit cards and high-interest personal loans are hazardous to your savings! These credit lines carry thousands of dollars of high-interest debt which can suck you in for years. Paying off your credit cards sooner will build your credit rating.

The other form of payment which is important is to yourself. This means start investing! Nothing is better than watching your savings flourish over the years with a compounding interest 401(k) or IRA account. These types of retirement funding are proven methods of gradually and safely growing your savings, while setting aside funds for your future. Open an online brokerage account, which can teach you investing practices and make routine contributions to your account.

 

Monitor Your Credit

Your credit score is what will ultimately determine a great portion of your financial freedom. This will get you better interest rates when purchasing cars or refinancing a home. It can also affect things which would seem unrelated, such as car insurance or life insurance premiums.

The reasoning behind this is someone with reckless life tendencies, such as drinking and driving, would probably also have poor financial habits. The reality is that individuals with lower credit ratings tend to get into more accidents and submit larger insurance claims than those with higher credit ratings. As a risk-taking company, an insurance firm would want to know this before determining your monthly premium. This is why it’s crucial to obtain regular copies of your credit reports to make sure there aren’t any derogatory marks staining your profile. Look into credit monitoring services such as TyeStyle Credit Solutions to protect your credit report!

 

Live Healthy, Informed and Below Your Means

Mastering the art of frugality through your mindset is key. Less can be more, and living life to the max while not splurging every day is entirely possible. Develop the minimalism habits of those wealthy individuals who live like every other regular person, and you will be on the right track. This doesn’t necessarily mean you must live like a peasant—it just means making small adjustments by understanding what you need versus what you desire.

Having health problems can absolutely affect your credit, as mentioned earlier. Weight issues and illnesses lead to huge insurance premiums, with poor health requiring earlier than anticipated retirement. Your company may also offer limited sick days, so once you use those up it eats into your income and, subsequently, your financial freedom. Ensure your success by eating healthy, exercising and dieting to increase your future lifestyle quality.

Stay educated—this is one of the biggest tips! Make sure you review yearly tax laws to maximize itemized deductions. Stay updated with financial news and stock exchange events to further your investments, and don’t hesitate to adjust it accordingly. Knowledge is power, especially against those who wish to exploit the uninformed. Make sure you know your credit limit as to not overspend, and dispute any inaccuracies on your reports.

➤ Need Funding or Building Your Business Credit? Click Here
➤ Need to Boost Your Credit Score? Click Here
➤ Connect with us on Facebook: TyeStyle Credit Solutions LLC
➤ Follow The Credit Lady on Instagram: @TyeStyleCreditLady

*Connect with us on Facebook: TyeStyle Credit Solutions LLC
*Follow The Credit Lady on Instagram: @TyeStyleCreditLady

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