Are you sick and tired of living paycheck-to-paycheck? Do you spend each month anxious about how you’re going to make it financially?
Every day,millions of women just like you wonder if they can ever stop worrying about money, or achieve financial freedom.
What if I told you there’s a better way? What if I told you there are some steps you could take to help you manage your finances and enjoy financial security?
Want to know what these steps are? Let’s jump right in!
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3 Essentials Steps to Financial Freedom for Women
First, I think we should define what financial freedom means. For me, financial freedom means not depending on anyone (e.g the government, ex-husband etc) for my livelihood,and having the financial means to do the things I love and enjoy.
Financial freedom also means having a reasonable amount of money set aside for my future needs, and paying for college for my kids.
Finally, financial freedom means I am capable of making my own financial decisions.
Now that we’ve gotten that out of the way, let’s look at some important steps you can take to achieve financial freedom.
1. Become Financially Literate
Women still lag behind men when it comes to financial literacy. In a survey of about 25,000 US adults, women across all ages answered fewer questions correctly on basic financial concepts like inflation and interest rates.
This is one of the reasons women are more likely to pay higher mortgage and interest rates,carry a credit card balance,and make minimum payments on their debts.
Another reason women lag behind is because a lot of women don’t like to talk about money.
Talking about money is almost like taboo for some women. They’d rather talk about sex, health, relationships, and other topics. Many women don’t like to talk about debt, net worth, or other money issues.
If you want to achieve financial freedom, you have to become financially savvy.
The reason why it’s important for you to be financially literate is so you can make smart financial decisions.
Financial literacy is essential for your financial health. Conversely, financial ignorance is one of the most dangerous things you can do to yourself.
Getting a financial education is your best investment if you are serious about financial independence.
If you lack financial education, here are some tips that will help you to become financially literate:
Start with understanding the basic pillars of financial literacy. What are these basic pillars?
- Saving, including how to build an emergency fund, how to save for big purchases etc.
- Tracking your expenses
- How compound interest works
- Basics of investing including the main asset classes, types of investing vehicles,differences between stocks,and bonds, difference between index fund and mutual fund, how to invest, where to invest etc.
- Difference between good and bad debt
- How to calculate your net worth
- How banks and credit card card companies make money
As you can see, there’s a lot to learn to become financially literate. But do not let that deter you. No one knows everything. What’s important is that you keep learning something new about personal finance every day.
So how do you become financially literate?
Start by creating a learning plan:
Figure out the area/areas of personal finance that you need to learn about or brush up on, and look for some resources that will help you get the knowledge that you need.
You can use free resources like blog posts or articles, or paid resources like personal finance books, courses or classes.
Fortunately, there’s a lot of financial literacy resources online. But, it takes time to sift through them to find useful and reliable information. There’s also a lot of misinformation online, so you really want to be careful about where you get your information.
Some personal finance blogs I read and can recommend are:
There is a ton of personal finance blogs, and you can waste a lot of time if you try to read all of them at the same time. Just pick two or three that resonate with you and start learning.
If you can afford it, you can also purchase some personal finance books. I’ve read a lot of personal finance books, and some are definitely better than others. But, I haven’t read one where I didn’t learn something new.
Some of my favorites are:
- The Total Money Makeover
- The Richest Man in Babylon
- Your Money or Your Life
- The Wealthy Barber
- The Millionaire Next Door
Getting a financial education should be the goal of every woman. I hope these resources will help you to get started.
The second step to becoming financially independent is to create a financial freedom plan.
2. Create a Financial Freedom Plan
The first step to creating a financial plan is to set some goals.
Some examples of goals you can include in your financial freedom plan:
- Debt Repayment – Set a goal and create a plan to pay off all your debt. It’s difficult to feel truly free if you have a lot of consumer debts.Check out this post for some tips to help you pay off debt.
- Building an emergency fund – If you don’t already have one, one of your goals should be to create an emergency fund. Most experts recommend 3-6 months of living expenses.
- Short-term savings – For big purchases like a car, roof replacement, vacation, down payment for a home etc.
- Saving for college – This can also be one of your financial goals.
- Income goals – Increase and maximizing your income..
- Saving for retirement – This is a long-term saving plan. Usually for 20 or more years.
These are some examples of goals you can include in your plan. Your goals will depend on your individual situation and what is important to you.
Don’t forget the basic rules of goal setting. Your goals should be realistic, measurable, specific and have a time frame for achieving them. For example, I want to save $5000 in the next 12 months.
After listing your goals, the next step is to develop your strategy
You can’t achieve your goals without a clearly-defined strategy. Your strategy is basically all the action steps you need to take to reach your goals.
Your action steps may include:
- Creating a budget/spending plan and tracking your finances.
- Finding ways to reduce your spending so you can save more money.
- Creating a debt repayment plan to pay off your existing debt.
- Changing careers, taking on a second job or starting a side hustle to increase your income.
- Contributing a fixed amount to your retirement accounts (if you already have one), or researching and opening a retirement account.
- Contributing a fixed amount to your emergency fund until it is fully funded.
- Contributing a fixed amount to your kids’ college funds.
- Saving for a down payment to buy a house.
- Creating an investing strategy so you can choose your investment vehicles, and how much of your savings you want to invest in them.
- Downsizing or scaling back so you can have more disposable income.
- Slashing your bills, grocery costs or transportation costs to help you save more money.
It’s very important to align your action steps with your goals. That’s why you need to first set your goals.
I know all this may seem overwhelming at first. But once you have created your financial freedom plan, the only thing left to do is to take action.
Don’t forget to evaluate your plan periodically so you can tweak or make the necessary changes. Sometimes you may need to change your goals or action steps if your circumstances change or something isn’t working. So keep an open mind.
The third step to financial freedom for women is to invest in appreciating assets.
3. Invest in Appreciating Assets
First, let me explain what I mean by appreciating assets. Appreciating assets are those assets that increase in value over a period of time like index funds, Bonds, Exchange-traded fund, real estate, mutual funds etc.
To be honest, it’s very difficult (impossible) to become financially free without some kind of investing.
What you choose to invest in will depend on how much you have to invest, how long you have to invest and how much risk you can tolerate.
I know a lot of women find this topic to be very overwhelming.
There are a number of factors that stop women from investing or saving for retirement. They include: lack of confidence, risk aversion, lack of financial education, and not having enough money to contribute to their retirement accounts.
Not investing is a very costly mistake many women are making. Letting your money work for you through investing is one of the best ways you can maximize your income, grow your money,and achieve financial independence.
So what should you invest in?
You can invest in stocks or real estate. Personally, I prefer investing in stocks than in real estate. You can also invest in both if you have the money.
Another option is to invest in a business, grow it and sell it for a large amount of money. Quite a few people have done that.
But I am not sure that’s a very realistic option for most people!
It doesn’t matter what you choose to invest in. What is important is that you don’t invest in anything you do not understand, and that you start learning how to invest, and all the different options that’s available.
Many women are not taking advantage of their employer-sponsored retirement plans (401k or 403b) and that isn’t a good thing.
If you work for an employer who offers retirement plans, then that’s a good place for you to start especially if they offer matching contributions. You’re leaving money on the table if you don’t take advantage of this opportunity.
Don’t think that it’s too late to start investing. When it comes to investing, time is your friend. So the sooner you start the better.
I do not recommend you start investing if you currently have a lot of high-interest debt except maybe contributing to your 401k or 403b).
The reason is because, the interest on your debt would negate any gains you make from your investments. So it’s better to pay off your debt (or at least the high-interest debts like credit card debt) before investing.
At the end of the day, it’s your decision,just make sure you think carefully and weigh all the pros and cons before you make a decision.
Here are a couple of posts on this issue that I found interesting:
If you are new to investing and completely out of your element, I can recommend the following resources:
I hope this post will serve as motivation for your to pursue financial independence.
As a single mom, it’s very important for me to achieve financial freedom. But it doesn’t matter whether you’re a single /divorced woman or a married woman. Achieving financial independence should be the goal of every woman.
I have heard horror stories of women who left all the decision making to their husbands, and later found themselves . in financial difficulties after their divorce or death.
These women had no clue about their financial situation. They assumed their husbands were doing a good job of managing the finances. But they were wrong.
With women living longer than men, and 50 percent of marriages ending in divorce, sooner or later you will have to manage your finances and make financial decisions on your own.
This is why it’s so important to play an active role in your finances whether you’re married or not! Don’t leave all the decision making to the men in your life.
Yes, that includes your dad, husband, brother, boyfriend or boss!
Instead of hoping that our financial future would be secure, let’s us be proactive about making sure that it is.
Now that you know the three essentials steps to financial freedom for women, which step do you need to implement first based on your current situation?
Let me know in the comments!
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