9 habits to help you achieve financial freedom

Constantly paying bills and covering expenses can be frustrating—especially if you aren’t left with much spending money afterward. Learn more about financial freedom and how to achieve your financial goals.

Key takeaways

  • Financial freedom can mean different things to different people. But generally it means reaching a level of financial comfort where you can worry less about money.
  • Defining goals and practicing responsible financial habits can help you work toward financial freedom.
  • Learning the basics about budgeting, spending, saving, investing, credit and debt might help along the way.

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What is financial freedom?

Financial freedom is sometimes used interchangeably with financial independence. In general, achieving financial freedom means living comfortably without money-related stress.

What financial freedom actually means to you depends on your financial situation and history. For some, financial freedom means having paid off all outstanding debts. For others, it means having enough money after paying the bills each month to save, grow retirement savings or simply afford a preferred lifestyle. For others still, it means being able to pursue interests and passions without having to worry about financial strain.

How to become financially independent with 9 helpful habits

If you’re looking to pursue financial freedom, here are 9 places to start:

1. Clearly define your financial goals

The first step toward becoming financially free is to determine what your specific goals are for your finances. Consider asking yourself a few of the following questions:

2. Make a budget

Once you know your goals, you can create a budget that helps you work toward them. Your budget doesn’t have to be fancy. You can create it manually or with a budgeting tool. If you’re not sure how to get started, check out some budgeting tips that could help.

3. Keep working on your financial literacy

As you work toward financial freedom, your financial literacy will be important. Financial literacy is understanding concepts like budgeting, building and improving credit, saving, borrowing and repaying debt, and investing—and having the ability to apply them to real-life situations. It can help you make more-informed short-term decisions that could improve your long-term financial stability.

4. Track and analyze your spending

To understand where your money goes every day, week, month and year, you can start tracking your spending habits. This can help you assess whether and where there’s room to cut excess costs. It can also help you identify habits to eliminate or reduce. Doing things like dining out less and cooking at home could free up money in your budget.

5. Automate your money

In addition to tracking your spending habits, it can be helpful to automate the movement of your money. You can choose a specific amount to automatically transfer into your savings account every pay period. The Consumer Financial Protection Bureau (CFPB) calls it one of the “easiest and most consistent ways” to build toward a savings goal.

Savings are just the start. You could also set up automated payments for your bills to ensure you’re avoiding late penalties and fees.

And you can automate payday with direct deposit, which is often faster and more secure than cashing a check.

6. Pay down your debts

Reducing the amount of debt you carry can help you achieve your other financial goals and move toward financial freedom. Creating a debt repayment plan though strategies like the debt avalanche method or debt snowball method can help you stay on track. Consolidating your debts can also help make it easier to start paying them off more efficiently.

Once your debts are repaid or reduced, you might have more wiggle room in your budget to pursue other financial goals.

7. See whether investing makes sense

Stocks, bonds, mutual funds, Roth IRAs and 401(k)s are just a few ways people invest for the future to help themselves achieve financial freedom. 

Just remember that investing involves risk. So consider talking to a financial expert about how to build an investment portfolio and choose the right investment assets to fit your goals.

8. Keep an eye on your credit scores

Having good credit scores can help you get approved for things like a mortgage, a car loan and credit cards with better interest rates and credit limits. So it’s good to regularly check your credit scores and take steps to improve them if needed. 

Tools like CreditWise from Capital One can help you monitor your scores without affecting them. It’s free for everyone. And you can use the CreditWise Simulator to get an idea of how certain financial decisions might impact your credit.

9. Consider meeting with a financial adviser

It can be difficult to know where to begin on your journey toward financial freedom. But financial planning with a trusted expert can help, especially when you’re just starting out.

Achieving financial freedom in a nutshell

Whatever financial freedom means to you, practicing habits like budgeting, paying down debts and monitoring your credit can help you get there.

You can learn more about a specific type of financial freedom called the Financial Independence, Retire Early (FIRE) movement. And if you’re looking to build more financial habits that could lead to greater independence, check out how to reduce your expenses.

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