Financial Freedom

Part of my Challenge Accepted 2018 list includes saving $10,000 by the end of the year. I know this will be difficult due to my student debt and not to mention my credit credit that has exceeded $5,000. Having financial freedom is a daunting task but anyone can achieve it with being S.M.A.R.T.

Before anyone can begin financial freedom, here are the keys to understanding that goal:

S - Specific

M - Measurable

A - Achievable

R - Realistic

T - Time Specific

The first thing I did was make a list of all my bills and the amount I pay for each month. Why is this important? You need to know how much money is being spent on bills each month. This will help you in seeing if you can cut costs.How can I do this? I would recommend using a spreadsheet from word or excel that will aid you in managing your expenses. A lot of people prefer to write things down, which is fine, whatever works for you is what you need to do. I however lose everything, so I created something I save on Dropbox; that way I have my list on the go.

The Next thing you need to do is: See how much money you are bringing in. Why is this important? You need to see you debt-to-income-ratio (DTI). This is how much money you are bringing in compared to how much money you lose in bills each month. If you are a person who is on a fixed income such as salary pay, this will be easier for you as you know how much money you will be getting each month. For someone who is on an irregular income or who gets paid per hour, I would suggest you using the average amount of pay you have received for last 6 months. If you can go further than that great! If not, then use what you have.  

After you have listed you bills, and figured out debt to income ratio, we now need to see if anything can be spared. For some people once you have done the debt to income ratio you may notice you don’t have anywhere in you finance to spare in money for saving. Or that all the bills that you have are necessary. Do not get discouraged because at this time you are not financially able to save, perhaps you will be in the upcoming months. For the others who have found that saving is possible, here is where we determine how much.  

Once you figure out how much you can save, pull up your bank statements and look at the transactions. As painful as it is to look at reality of your spending, you need to know where your money goes; whether it goes towards eating out, going to the movies or that Starbucks coffee every morning. Find out what you can live with and without. Necessities like toilet paper, food, and “emergency” wine comes out of the surplus. So after you’ve done the math and you’ve determined how much these things cost you each month, you need to make a place for it in your budget. The point of a budget is to fit into your everyday life and show you where you could spare to make some financial changes. But it shouldn’t deprive you of anything that you feel is important. Once you’ve added your necessary wants and your needs to your budget you have a rough estimate of what you have left over.  

Don’t worry people, we’re almost there. Now at this point, you’ve added everything into your budget and you have exactly 200 dollars left over. I bet your tempted to put the whole thing into savings huh? Nope, you’re only going to put 25% of whatever is left. IF you only have $10 left, than 25% of that. If you have $1,000 left over than 25% of that. The reason is because of the unknown. Do you know how many times my car broken down and I had to dip into my savings! We all have these hiccups that can happen at any given time. One thing we don’t want it to do is leave us without any savings. So better to place a little in your savings and have your emergency money somewhere else.  

Somewhere else? Where else can my money go? In my opinion everyone should have 5 accounts.  

  • A checking account for bills only

  • A checking account for personal use (when it runs out, you sit down)

  • An emergency account (in case something hits the fan)

  • Goals Savings  (Something off your things to do in 2018 list)

  • Savings account

I know before I began my goals, I have to attach my credit card debit first! Keep reading to find out how I achieve the rest of my bucket list goals.