3 Steps To Financial Freedom

Most people find financial planning to be intimidating. 

It doesn't have to be!

However to reach financial freedom and enjoy a care free lifestyle, planning is necessary.

Once a solid three to six month emergency fund is in place and consumer debts are under control along with a great FICO Score, it is time to create a solid plan for the future.

Step 1 Consider Your Lifestyle

The first step is to consider 

the lifestyle that you want. 


Consider your needs

when you retire. Who will be 

a part of your life and what 

are their expectations. Think 

about what you plan to do 

with your time.

How will you live:

• Will your house be paid off by the time you retire?
• Will you be renting?
• Do you anticipate living in a retirement community?
• Where would you like to retire?
• Who are you retiring with and what are their needs?
• Are there people in your life you will still need to support?

What do you plan to do:

• Travel regionally, nationally or internationally?
• Enhance your learning, enjoy cultural activities?
• Develop your hobbies or take up an increased interest in sports or physical activity?
• Just take it easy and stay home with your grand kids?

While it is impossible to predict the future, the longevity and health of older family members is a good indication of what you may face.

Will you have special needs:

• Will you need medical support?
• Assisted living?
• What are the needs of your partner or other family members?

Step 2 Review your Plans and Circumstances

Taking some time to review your plans will probably give you an indication of how much money you will need to retire in the style you would like. 

Popular advice suggests these savings should generate an annual income of at least 75-80% of pre retirement income to maintain the established lifestyle – assuming that work related expenses, such as commuting, will disappear.

This may be an outdated concept. Most people still plan to have at least one vehicle after retirement. We now enjoy a period of inexpensive fuel, but it probably won't last long.

I would recommend targeting 80% to 100% of pre retirement income to truly enjoy retirement.

Step 3 Accumulate Savings

There used to be a time when people would be well prepared for retirement by saving 10% of their income.  Company pension plans were solid and most people retired from one company after a long career. These days people tend to migrate from company to company and may not stay long enough to qualify, or they may be contractual or entrepreneurs running their own business. The company pension of previous generations is a rarity these days.

Today people need to start by saving at least 15% of their annual gross income for retirement. Of course, the later a person starts, the more needs to be saved. 

It is unwise to rely solely on Social Security or any company pension plan.  To enjoy a comfortable retirement, personal funds are necessary. 

By retirement, a person should have savings equivalent to 12 to 15 times their final salary. 

Any change in interests, such as travel or expensive hobbies may require even more funds. Changes in health may also require additional funds to draw upon.

There are many retirement calculators available through a Google search that will help you determine your needs.

The best way to ensure a comfortable retirement is to leverage funds now. Smart investments now can yield substantial returns.

These steps are good places to start a more conscious and directed route to achieving your financial freedom. Read, reflect and take what will work for you.

Bottom line is that there is no blanket strategy. Each person must evaluate their own circumstances, needs and desires. Get the help you need to achieve financial freedom.


Above all, believe in yourself and believe that you will achieve your goal!

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Sources:

Lynda at Sonoran Sun | Private Equity Investments