This post by guest blogger Fahima Anwar appears in our series Small Business 500.
You always hear people talking about quitting their job and breaking free of the daily grind. However, only a small percentage actually see their goal through. The majority end up stuck in the same old cycle, living pay check to pay check and never getting any closer to their goal.
Here are a few steps that will help you make firing your boss a reality, even with a modest income:
1. Set achievable short term goals.
The first mistake that people make when they’re setting out to achieve a sense of financial freedom is making too many large goals at once. Doing so builds up a wall that you’ll never break through, and you’ll quickly give up because you feel overwhelmed. Instead, make small daily, weekly and monthly goals — like eating fast food less frequently, and carpooling to work so you can save on gas. Make sure you write your goals down and keep them in plain sight.
2. Set up a dedicated savings fund.
Usually, the easiest way to build savings is to hook up your savings account to your checking account. Doing so makes it really easy to transfer funds over, even if it’s only a few cents at a time. In the beginning when you don’t have very much to deposit into your savings account, you can get into the habit of always keeping your checking account balance at an even number – just transfer over the excess change to your savings account and watch the balance grow.
The most important thing to remember about setting up a savings account is that you can’t use that money! Although it may be tempting to delve into the funds for one reason or another, you just have to keep reminding yourself what of you’re working towards — another great reason to always keep a list of your goals handy at all times.
3. Pay off outstanding debt one chunk at a time.
Credit cards, loans and lines of credit are not synonymous with financial freedom. In fact, most people end up spending more in interest than they do on the initial expense they took out the loan for, which only creates more debt.
4. Reduce your monthly spending.
Most people are completely unaware of how much money they actually spend on unnecessary purchases. For instance, can you count the number of times this month that you chose to eat out instead of making dinner at home? How much did you spend on movie tickets, cable and other forms of entertainment? The best way to see where your pay checks are really going is to track your purchases for at least a month by diligently writing down every expense. This will make it a lot easier to pick expenses to cut back on.
5. Don’t forget to plan for the long term.
Although easily achievable short term goals are the best way to get motivated and stick with it, financial freedom won’t become a reality without long term planning too. Once you’ve cut out all unnecessary expenses, you should be left with some extra income every month that you can place into your savings account. Eventually, you should plan on turning your savings into a diversified investment portfolio that can grow with you.
The most important thing to remember about leaving the 9-to-5 rat race behind is that the small steps are where it’s at. Financial freedom won’t happen overnight. Instead, you’ll have to make a conscious effort to move in the right direction every day.
The information and tips we’re sharing in this article are meant to be a starting point for your year-end tax prep, so you can be informed and feel confident when working with your accountant. Be sure to check with a tax expert in your country or region for any specific advice you need, as each business (and tax district) is different. As our lawyers would say: “This article is for informational purposes only. It should not be considered legal or financial advice.”