Freedom comes in many forms: purchasing your dream home, traveling the globe, or simply spending time with family and friends. Of course, everything comes at a cost, and it’s important to make sensible money decisions in your earlier years. Saving money and setting yourself up for the future ensures that you can you fully enjoy your retirement and carry out lifelong dreams.
Being sensible with finances is not always easy, especially when most people have a lot to pay for. Most of these are non-negotiables like bills, gas, and groceries.
That being said, there are several decisions you can make now that will lead to a more blissful life in 10, 20, or 30 years’ time. Here are 9 of the best money decisions that can create more freedom later in life.
Money Decision 1: Clarify Your Outgoings
Clarifying your outgoings is a sensible money decision that can lead to more freedom later in life because it gives you more insight into where your money goes. To do this, you’ll need to follow these steps:
- Gather all financial information (including bank statements and credit card bills).
- Separate your outgoings into categories (for example, fixed costs vs non-essentials).
- Analyze your income vs your outgoings.
- Create an action plan based to change how much you spend for maximum savings.
Money Decision 2: Create a Clear Financial Plan with Debt Management
If you have a lot of debt owed to different organizations, you might feel overwhelmed by the prospect of paying it all off. The chances are that different debts go out on different days, and you sometimes don’t expect it when it happens.
That’s no good for anyone. With debt consolidation, you can unify all of your debts into a single, monthly payment. It makes the process of paying everything off that much clearer.
Using a debt management service
You can use a service like Achieve for access to professional negotiators who can pull the final rate of your overall debt down. It’ll give you a structured, 24-48-month plan where you pay just one payment for all your debts every month. You’ll be able to finally see the light at the end of the tunnel, even if it takes a few years.
Money Decision 3: Build a Weighty Emergency Fund
It feels good in the moment to splurge, but you likely know that this only hinders your savings. Your goal here is to build a weighty emergency fund that could sustain you if you ever lost your income.
The general rule is to save between three and six months of living expenses in case of emergencies. Of course, the more, the better. Some tips for increasing your emergency fund include:
- Opening a savings account with a separate bank
- Saving small amounts consistently over time
- Choose a high-yield savings account
- Calculate your goal and how long it will take to get there
- Put any unexpected additional income into the savings account straight away
Money Decision 4: Start a Side Hustle
In this modern era, more and more people are starting side hustles to fund their lifestyles. While your main day job should provide most of your income, you can make more money on the side if you dedicate enough time, energy, and creative thought.
When choosing a side hustle, consider your skillset. If you have no idea about fashion, it’s probably best to avoid selling clothes on the side. However, if you have a genuine passion for art and design, you may be able to make money selling artwork or designing people’s websites.
Money Decision 5: Set Spending Limits with Card Controls
If you want more freedom in your future, you’ll need to spend less money now. A simple way to manage that is by setting spending limits on your debit cards.
Most banks offer card controls. You’ll just need to sign into your bank account and then navigate to “manage cards”. From there, set the restrictions you want. For example, you might limit yourself to spending a maximum of $150 per month on online shopping. You make the choices.
Money Decision 6: Automate Your Savings
Making saving money easier means saving more money overall. If you actively have to move money from one account to another, there’s a chance you won’t save as much because of the physical task you have to do. Plus, you might decide in the moment that the money you should be saving would be better spent elsewhere.
However, if that money automatically goes into a savings account, the money will steadily rise over time without ongoing intervention from yourself, which is truly key to building a good savings fund.
There are a few ways to go about automating your savings, including:
- Using an automated savings app that transfers money
- Rounding up debit card purchases to send the extra change to a savings account
- Automatically sending money from your paycheck to your savings account
Money Decision 7: Invest in Insurance
Insurance policies provide payouts in situations where you really need the money. Of course, each type of insurance is different, and they include:
- Health insurance: To cover healthcare costs. For example, visits to the doctor’s office or hospital.
- Auto insurance: This one is usually mandatory in the United States and covers collisions and liability.
- Homeowners insurance: Protects the property you own from damage from floods, theft, fires, and liability.
- Renters insurance: Protects the property you rent from damage, similar to homeowners’ insurance.
- Life insurance: Provides a payout to your dependents when you pass away. Covers things like funeral costs and lost income.
- Disability insurance: Replaces income if you become too sick or injured to work.
The reason investing in insurance now provides more freedom in the future is that you never know what’s going to happen. If you end up sick or with a disability, for example, you want to know you can still afford to pay the bills. Access to money equals freedom.
Money Decision 8: Make Specific Saving Goals
Most people have the simple goal of wanting to save more money. What works better, though, is creating very specific targets you want to reach.
Start by determining what you want to save for. That might include:
- Your child’s education
- Retirement
- A dream holiday
- A new car
- Buying a property
Then, determine how much you need to save and how quickly you want to reach that goal. It will give you an exact number you’ll need to save that month. Of course, you may need to adapt to make it affordable.
Money Decision 9: Live Within Your Means
Last but not least, learn to live within your means. The problem here is that many people don’t actually understand what living within their means is, perhaps because they are so used to a particular lifestyle. Some signs you are living outside your means include:
- You’re using a credit card too much
- You make minimum credit card payments
- You’re living paycheck to paycheck
- You’re constantly using your overdraft
- You fail to stick to a budget
- You have no savings for retirement
If these apply to you, it’s time to turn things around.
Living within your means essentially means spending less than the money you take home each month. To manage it, you may have to make lifestyle adjustments such as cutting down on subscriptions, eating in more than dining out, and not buying the latest technology as soon as it comes out.
You don’t have to deprive yourself of a good life right now to create a better future, but you should take accountability and make sure you’re not spending more than you actually earn.
