Carolyn Hansen: The steps needed to achieve financial freedom

Embrace sacrifices. Becoming financially independent does not happen overnight. Photo / Getty Images

HEALTH BY CHOICE

What are the components of a healthy, happy, content life? First and foremost, is the obvious, one's health. No one can be productive or completely happy with ill health. So, we can easily designate physical and mental health as a condition towards a healthy, happy life.

However, health goes way deeper than physical and mental health. True health includes financial freedom.

What is financial freedom? It is your ability to maintain your desired lifestyle without drawing a regular pay cheque. Unfortunately, many never know the feeling that being financially free offers.

If you've struggled at all with dieting, you've likely heard the term yo-yo dieting. Yo-yo dieting happens when someone gets in a vicious "weight cycle" of losing weight and regaining it, losing it and regaining it.

Unfortunately, this yo-yo term extends out to other areas of our lives as well.
Finances are one of them.

If you are like most people, you earn a weekly pay cheque which is spent on necessities, bills and depreciating possessions. As you earn more, the temptation to spend more grows too. Now, you have a bigger pay cheque with larger bills, more responsibilities and less free time. This is a financial yo-yo cycle and it continues for many people until retirement or death. They earn, they spend, they earn, they spend.

This type of lifestyle provides little, if any freedom. Freedom to change careers, take time off, holidays with your family, start a new business, all these things are objects out of reach to those who have not built financial freedom.

Is this the type of lifestyle you want? Is this the kind of retirement you are headed for, one that provides little freedom and play? One that locks you into a fixed income that barely covers your needs no less enough left over for play?

No matter what your current age is, financial freedom is key. And, there is no better time than now to build it.

Begin by discovering what financial freedom means to you. Is it a pressing desire or are you content to continue working and spending your pay cheque freely?

Ask yourself these questions (but be honest with your answers) …
"Are you content with your existing lifestyle?" Does it make you feel happy?
"Have you examined your work-life balance?"
"Do you enjoy your job and find purpose in the daily routine?" Are you working a job because you enjoy it? Or are you financially dependent on it?

If you answered "no" to any of the above questions, you have some serious soul-searching to do and some new healthier lifestyle habits to implement.

You may be in a career you love and want to keep working, that's perfectly fine. However, the job could be eliminated, or your health could take a turn for the worse, so being financially stable is still very important.

On the other hand, if you truly dislike your job, finding financial freedom should be your number one priority. You should be saving as much as you can so that you have the freedom to change careers to one that does fulfill you. It might also require that you take further training or advanced training to achieve higher pay or job satisfaction.

If you truly want to be financially independent, you must have a plan in place to take you from dreaming about it to experiencing it. You'll need to implement strategies and lifestyle changes.

You'll need to break free of the yo-yo financial cycle that nearly 80 per cent of the population find themselves in. And, the first step you'll need to take is to learn to "pay yourself first".

Pay yourself first. This means every time you receive income, you pay yourself first by putting some of this money aside before paying your bills – rent, mortgage, food, clothes etc.

Stop listening to others. Be careful who you put trust in. Are they enjoying the same type of financial freedom you are after? Only take advice from those who already enjoy the result you want to get!

Embrace sacrifices. Becoming financially independent does not happen overnight. It will take time and patience along with extra effort. You cannot continue doing exactly what you are doing and expect changes in your life.

Be grateful. Gratitude is the "great attitude". Look around you and be grateful for all that you currently have. Your family, your friends, for the beauty that nature abundantly supplies us and for breathing and waking up every day! Those things are the same whether you have a dollar or a million dollars in the bank.

If you truly want to reach financial freedom, you will have to establish goals in different areas of your financial life including:

Controlling spending habits and increasing income.
Paying off all loan debt – student loans, credit cards etc.
Determining your investment objectives and understanding your savings pattern.
Defining your long-term financial goals and implementing a legacy plan for your heirs (this includes life insurance for your family.)

For most, being financially wealthy requires another very important step - that they master living beneath their means. Living beneath one's means is the central core of learning how to become financially free. It simply means that you are willing to sacrifice now in order to provide a better life for yourself and your loved ones in the future.

Saving money should be an ongoing project/goal in your life. Never let excuses get in the way of saving money. If your current income does not allow you to save money, then you must find a way to increase your income or lower your expenses or both.

You should have an emergency cash fund set up to cover all of life's quirks and changes. Start by setting aside enough to cover 30 days' worth of living expenses. Once that is built, expand it to cover another 30 days.

Continue building your emergency account until you have between 3-6 months of expenses covered as a salaried employee or 6-12 months if you are self-employed or paid by commissions.

Once your emergency fund is built, you can start investing money to earn more money. You should also diversify how your income is made. Multiple streams of income represent a form of financial independence by themselves.

And, lastly, get out and stay out of debt. You will never become financially independent if you owe money to banks or other people. Debt is the opposite of financial independence.

Growing up financially involves breaking old unwanted habits and cultivating new and effective ones, so, the perfect place to start your journey to financial independence is to make a list of unhealthy habits and behaviours and then work to change them, one by one, over time.

• Carolyn Hansen is co-owner of Anytime Fitness.