As financial advisors and wealth managers we commonly hear questions like "how can I achieve financial freedom?" and "what are good long-term habits for meeting my financial goals?". Whether your focus is on investment management, retirement planning, or finding ways to save money, some simple but effective financial habits can help you work towards and sustain your financial freedom objectives.
At Mission Wealth our registered advisors use a life-centered planning process. This is purposefully oriented around each individual person's challenges, goals and approaching life transitions. This is because we know that factoring in the uncertainty of what life throws at you is an important part of successful long-term financial planning. Increasing debt, and unexpected financial emergencies can be a quick way to prevent you from reaching your goals.
This process aims to help you and your family achieve important long-term goals like buying a house, growing a nest-egg, sending your kids to college, and enjoying a secure and fulfilling retirement. But the journey to those major milestones begins with the smaller steps that we take every single day.
We've put together our top 5 daily and monthly actions that can grow into money habits that will have a big impact on your financial future.
What is financial freedom?
Having the ability to pursue the lifestyle that you want without worrying about income and money is a very common definition of financial freedom, but it's an individual term that is unique to your circumstances. As financial advisors we work closely with clients to first uncover how they define wealth in their lives, and to then align their financial plan to achieve their goals and gain a deep sense of fulfillment in their lives.
The approach we take towards financial planning can change according to how you define financial freedom. There are multiple levels, so items such as interest rates, investment management, mutual funds and allocations, estate planning, financial projections, retirement planning, and charitable giving for example, should be incorporated as a piece of the larger puzzle that is your financial plan.
Before diving into our top 5 Habits for Financial Freedom...
Review the items below to make sure that you're in a good place to start optimizing your approach to personal finance and building habits for financial freedom.
- Review your life goals (big and small!), and spilt those goals into smaller steps. What is financial freedom to you?
- Create a budget that covers your minimum financial needs. This will help you to see where you have some flexibility and where you don't.
- Keep an eye on your credit; watch your score for unexpected changes.
- Explore setting up an emergency fund if you haven't already.
- Focus on your health - this isn't something that money can buy, yet it's the most valuable part of all of our lives.
Top 5 Habits that can lead to Financial Freedom.
Habit 1: Automatically pay your future self.
Adding monthly saving and investment goals to your household budget is a good way to make sure you're dedicating a part of every paycheck to your future. But many folks tend to dip into these future funds for short-term expenses because they know that money is available. After all, you don't need to retire tomorrow, so why not have a few extra carry-out meals this month or buy a new TV you don't really need?
To set those saving and investing budget items in stone, pay your future self first by automatically deducting contributions every month. By committing to those investments in your future, you'll also be committing to the rest of your budget.
Habit 2: Regularly pay off credit cards.
In some financial planning discussions, credit cards get a bum rap. But there's nothing wrong with using credit cards – or even multiple credit cards – as long as you are using them responsibly.
And the most responsible way to use credit cards is to pay them off completely, either right after a big purchase or at the end of every month. Other debt items on your monthly budget, like student loans, car payments, or your mortgage, typically have much lower interest rates. Paying off high-interest credit cards in full and on time will keep your spending under control and build up your credit rating.
If you do find yourself struggling to stay on top of your credit card bills, it might be a good idea to switch more of your spending to cash. Using a debit card or a payment service like PayPal that’s tied to your bank account can help you be more mindful about what you’re about to buy and how you’re going to pay for it.
Habit 3: Maintain your most valuable assets.
Try as you might, you can't wish away the check engine light on your dashboard. Eventually that spot on your roof that only leaks when it's raining hard is going to run like a faucet any time there's a sprinkle. Take care of small problems when they're still small and you'll avoid paying bigger bills later.
That goes double for your single most valuable assets: your health and your family’s health. The best and most affordable medicine is preventative. One way or another, you're paying for health insurance every month. Use those benefits!
Habit 4: Remove spending 'triggers'.
We often don't think to consult our household budgets when there's a sale at our favorite store, or when a daily deal bouncing around our social media feed looks too good to pass up.
If you find yourself susceptible to splurge purchases, think about ways you can reduce spending opportunities. Turn off ad notifications from shopping apps. Unsubscribe from magazines or email newsletters that just make you want buy more stuff. Keep your wallet or purse by your nightstand. The long walk up that flight of stairs might be enough to deter you from a purchase you're going to regret when your next credit card statement shows up.
Habit 5: Give your finances a professional check-up.
Is a big promotion about to change your financial goals?
Does your elderly mother need to adjust her living situation?
Is there an opportunity to refinance your mortgage while rates are low?
Have there been any major changes to tax laws you should be aware of before filing?
Whenever your life and your money are about to turn a corner, talk to a professional who can help you sort through your options. We certainly want to be on that speed dial, so if you need to discuss long-term goals, short-term concerns, or anything in between, don’t hesitate to get in touch.
How Mission Wealth Can Help
At Mission Wealth we work closely with you to identify your goals and build your roadmap, while helping you to consider your future options and optimize your financial security. Reach out to a Mission Wealth fiduciary financial advisor near you, or contact our experienced team.