There are many life changing events that put pressure on your financial freedom.

Job loss will have an immediate effect on your bank account. Separation can drastically impact your household income. The death of a loved one can incur significant financial repercussions.

Any one of these experiences can make paying next month’s mortgage or electricity bill a major source of anxiety.

Financial troubles aren’t foreign to Julie. After going bankrupt, she had to re-evaluate her attitude toward money.

It’s a cliché, but appropriate – if she can do it, anyone can! 

Here are Julie’s tips for reaching financial freedom.

Review your finances

It is easy to avoid looking at your finances too closely. Facing up to your true financial position can be utterly depressing! But to achieve financial freedom, you need to first understand exactly where you are now. Review your bank accounts, debts, as well as your income and any impending major expenses. Knowing exactly where you stand is essential before you start budgeting or setting goals!

Set goals for your financial freedom

The next step to financial freedom is to set some goals – short term and long term. Where exactly do you want to be in a month’s time? 6 months? A year? Is there a car loan you want to be paid off sooner rather than later? Do you want to have accumulated some extra savings? The first step toward achieving your financial freedom goals is to make some!

Make clearing debt a priority

The more debts you have, the more interest you are paying. It goes without saying, then, that the less number of debts you have, the better off you will be!  But in order to pay off your debts, you need to be strategic.

Don’t just throw the same amount of money at each debt every month. This will only extend the amount of time it takes you to reach financial freedom, and will mean that you are paying more interest to more places!  Instead:

• Make a list ordering your debts from smallest to largest
• Designate a fixed amount to contribute toward clearing these balances every month. Make this amount the minimum payment on each of your debts, except the smallest one.
• Dedicate every spare cent of your remaining finances toward paying of the lowest debt.
• Once you clear your first debt, keep paying the minimum payment amount on all of your larger debts, except the one with the next-lowest balance.

This technique will allow you to clear out the number of debts you are paying back faster. The less number of debts you have, the less interest you are paying, and the sooner you will pay off all of your debts in the long run!

Optimise your bank accounts

Even though banks can be more painful than a toddler in a tantrum to deal with, they are also super competitive. They want your business, and will often stop at nothing to get it.

Check out your money, and do some investigating across other banks. Are you getting the best interest rate available to you? Often the big banks will offer huge interest rates to new customers for the first year of service. Is it worth putting any of your savings into an account with another bank to earn some extra money?

If reconsidering you bank accounts wasn’t thrilling enough for you, it’s also a good idea to reconsider your mortgage or other loans you have with the banks. Will consolidating your debts reduce the amount of interest you will be paying? Does another bank offer a better deal on your home loan?

Fastrack your financial freedom by investing time in your money.

Make a budget

Once you have organised your debt outlay and reassessed your bank accounts, it’s time to make a budget. Plan out exactly what you can afford to spend on things like groceries, leisure and bills – and stick to it! The best way to do so is to print out your budget and leave it in visible place, like the fridge or next to your calendar. You can even make a grid where your record your spending in each area to ensure that you are on track. By externalising your spending habits through writing you will make it easier to follow!

Tip: Australian Securities and Investment Commission (ASIC) and Pocketbook each offer a comprehensive Budget Planner that can assist you to manage your finances. All you need to do is enter your details, and the online generator will do the rest. How’s that for convenience?!

Try to generate other income – even if it is only a once-off!

After a life changing event, upping your hours at work or taking on another job is usually unviable. But when urgently in need of financial freedom, sometimes we have to get creative!

Do you have some unworn clothes or unused toys lying around? Have a garage sale or pop them on eBay!

There are also a number of websites as listed on Survey Australia where you can fill out online questionnaires in exchange for credits, which can be exchanged for gift vouchers or Paypal payments. While these sites don’t always generate cold hard cash, the vouchers can pay for your groceries, and free up some money in other areas of your budget.

By following the above 6 steps, Julie was able to quell her money worries and (after some long, hard saving) reach financial freedom.

If you are in a severe financial rut, never fear! Our Managing Your Finances article has details about government assistance packages for the unemployed, as well as financial freedom tips for those in crisis.

Whatever financial situation you are in, we hope that your money troubles are soon a thing of the past.

The Clarity Road Team