5 Steps Towards Financial Freedom (That Don’t Include Making A Budget)
So, you have decided you want to take control of your finances - that's incredible! Take a moment to congratulate yourself!
Now that you have made the decision, it’s time to take action. Taking your first steps towards financial freedom is a big step, and jumping into the world of personal finance can feel extremely daunting. From deciding between budgeting on a spreadsheet or an app, cash stuffing or card tracking, or using the snowball versus the avalanche method to pay off debt; personal finance can often feel like learning a new language. (If you have no idea what I’m talking about, don't worry - we will cover it in a future blog!) Just remember, you are not alone on this journey, and there are plenty of resources available to help you understand what approach will work best for you.
The reality is that the path towards financial freedom is a mental battle that begins long before you sit down to make a budget.
Here are 5 steps you can take on your journey to financial freedom that will keep you on track and make personal finance feel more accessible and exciting!
Step 1: Address Your Mental Health
Now putting this as step #1 may seem counterintuitive, considering that working on your mental health can be expensive, but this is such an important first step towards building a healthier and more sustainable relationship with your money. Addressing your mental health must be prioritized.
This step will look different for everyone. For some people this first step will entail starting therapy, or bringing money conversations into your existing therapy sessions. For others it could mean confronting your current mentality around money, or having difficult conversations with a partner.
Ask yourself:
Does thinking about money make me feel anxious?
Do I avoid checking my bank account balance?
Do I feel in control of where my money goes or does it seem to disappear?
What systems/programs have worked for me in the past? Which haven't?
What is my parents' relationship with money? Have I adopted their habits or am I overcompensating to avoid their behavior?
Our relationship with money often stems from how we were raised, and the relationship our parents had towards their money. Was money something readily available in your household and now you struggle to handle it on your own? Or were you constantly stressed about your parents now having money, and now you live in the same mindset?
Working through these questions, either with yourself or with a therapist, can help you understand your behavior, and allow you to rebuild your foundation for a healthier relationship with managing your money. Remember, reaching financial freedom should be exciting, not stressful!
Step 2: Find An Accountability Partner
Think of this next step as finding your gym buddy, but for finances. You don’t want the person holding you accountable to be worse off than you. This shouldn't be someone struggling financially themselves, or someone you know that will enable your old habits or impulse decisions.
If this person is your partner or spouse, make sure your goals are aligned and you are both on the same page when it comes to making changes in your spending habits and lifestyle. Otherwise, it might be best to have a friend, sibling, or neutral third party hold you accountable.
Ask Yourself:
Do I trust this person to see the ins and outs of my finances?
Are they in a better financial position than me?
Have they already accomplished the goals I am setting for myself?
Will they make me feel judged or ashamed if I make mistakes along the way?
Will they take advantage of my situation, such as asking to borrow money?
Have they enabled my poor financial decisions from the past?
Have a candid conversation with your accountability partner about what your goals are, where you have fallen short in the past, and the best way to motivate and put you on track if you start to fall off again in the future. You should determine if you are motivated by positive or negative reinforcement, and if you respond best to a gentle or firm approach to hard conversations, which will without a doubt come up.
Step 3: Follow Finance Influencers
This is a step that will make a huge difference in your journey, but it also comes with a huge caveat. Without a doubt consuming finance content, like Podcasts or Youtube videos, can serve as a free and easily accessible educational tool. However, as with any media, use your best judgment when consuming any type of advice, especially when it comes to your finances.
Whether you choose to follow the Baby Steps with Dave Ramsey, or get yelled at by Caleb Hammer, finding content that gets you excited to reach your goals is an invaluable tool in your kit. Sometimes, the best motivation can come from hearing other people's success stories or financial audits that reflect your current situation.
Ask Yourself:
Are they trying to give me investment advice? (If so, steer clear!)
Am I listening to a range of perspectives to find one that works best for me?
Does their system align with my own personal finance goals?
What are other creators saying about them online?
Step 4: Make Clear Goals
Welcome to the most exciting of the 5 steps: crafting your dream financial future! If you have ever found yourself daydreaming about the first thing you would buy if you won the lottery, you may think you have this step already completed, but don’t skip it just yet.
Setting clear, specific, and achievable financial goals sets the foundation of your financial journey. These goals will act like a north star when you inevitably have a bad spending month, or start to lose hope in overcoming your debt.
In order to stay motivated, you have to set goals you are excited about. Put them into two categories; goals you will achieve by the end of the year, and goals you will achieve in the next 5 years. Goals for the next year may look like paying off that one stubborn credit card, completing your 6-month emergency fund, or maxing out your 401K contributions. Goals for the next 5 years may look like paying off your car loan, saving for a down payment on a home, or making your first big investment.
Ask yourself:
Do I feel like these goals are achievable?
Do I get excited when I see myself progressing towards these goals?
Can I envision what my future will look like if I stick to these goals?
Am I tracking my progress towards these goals on a monthly basis?
When you are ready to make a budget, whether on an app, spreadsheet, or journal, dedicating the first page to outlining these goals can be a great way to make sure you are regularly reviewing them and checking in on your progress!
Step 5: Hack Your Mentality Around Money
This final step might sound a little absurd, but stay with me; there is a reason the best step is saved for last. Like we mentioned in Step 1, a lot of our mentality around money comes from the way we were raised. If you grew up constantly hearing money talked about as a negative and scarce resource, it's likely you continued living in that narrative when you became financially independent from your family.
Imagine how it would feel to wake up every day NOT thinking about money. NOT stressed about making your next bill, NOT worried about the compounding interest on your credit card, and NOT avoiding checking the balance in your checking account. Achieving this level of mental freedom begins with rewriting your narrative around money.
Here is a bit of homework for you to leave with. Below is a list of phrases you can practice saying to yourself (in front of, or not in front of the mirror) to work on changing your mindset around money. Keep in mind, not all of these phrases have to reflect your exact financial situation now, but by swapping your negative thoughts for the positive affirmations below, over time your finances will begin to reflect these statements.
Tell yourself:
I will achieve financial freedom.
I am in control of my finances and my financial future.
Everything always works out for me.
I deserve everything to work out for me.
Starting your journey to financial freedom by reorganizing your finances before addressing your mindset about money is like putting on your socks before your shoes. You might experience short-term success, but without a strong support system and clear objectives, your first setback could discourage you from moving forward.
Treat these 5 steps as a reset to your financial foundation. And now, you are ready to make a budget!
