Financial Freedom Series

How to Achieve Financial Freedom – Part 2

Last week we discussed the first step in your journey to Financial freedom.   I hope that through that exercise, you have decided how to spend on purpose by understanding what your spending habits are and tweaking those numbers.  If you haven’t gone through that yet, check out that post by clicking here.

But the second step in your plan needs to be paying yourself first.   You should be the first one that reaps from your employment or financial endeavours.  You need to learn how to save money, not only so you have a rainy day fund, but save for the future to achieve the financial goals that you set for yourself.

To achieve financial freedom, you MUST learn how to pay yourself first.

Pay yourself first

Pay yourself first. You have created your spending plan, and now that you have that in place it should include saving.  One of the most important things you can start doing is setting aside a bit of your net income to pay yourself first BEFORE any other debt.  There are many ways to accomplish this and it’s best to make it as easy as possible.    If you think that you have debts and you should be paying those off before you start any saving, that is the wrong way to think.  Eliminating debt will be something you have to look at and eventually a position you will be getting to.  However, Saving is key to achieving the financial freedom you want.   And you don’t need to be “cheap” but you do need to be “Frugal“.

Follow the following tips in order to start saving:

1.  Make it automatic & non-negotiable.  When you don’t have to think about it, you know it won’t be negotiable.  Sign up for your bank’s automatic transfer program and move a percentage of your pay or a specific amount to your savings account each payday or each week depending on your situation.  Or if your paycheques are not regular, make the transfer weekly, bi-weekly, or monthly.   You don’t have to start with a large amount, but you do have to START.  Try $10 per week, and build from there.
2. Ask for discounts with some of your irregular expenses.
   • Start with your utilities like cable, phone, or internet.  Many of these companies offer discounts or package deals all the time, but not unless you ask.  Call them and ensure you’re getting the best rates for these monthly services.
   • Another area to look at is your insurance costs.  Ask them about any discounts you may be missing out on your policy.  You may be entitled to discounts that you qualify for, for example – snow tires on your car, alarm system at your home, your age, your marital status, your claims free history, multi vehicle or multi policy situations, etc.   All of these things can lead to substantial savings on your premiums.   Do the homework and ask the questions, any good broker will be happy to investigate for you.
3. Re-Think your purchases.  Be frugal when you can. Try to resist impulse buys, and if possible, wait 24 hours before you purchase an item.  Usually once you think about it, you may come to the realization that you don’t even need the item.
4. Look for savings in Regular expenses.  Check the flyers for items that you purchase on a regular basis.  Or just keep an eye when you’re grocery shopping, see when they go on sale and purchase in bulk.  This may not be the most option for perishable items, but for non-perishable items you may find substantial savings  For example, you know you’re going to use toilet paper – don’t pay full price for toilet paper when you can buy it when it’s on sale.  Or if you have young children, diapers are a huge expense – buy them when they’re on sale!
5. Open or top up your Tax Free Savings Accounts.  The TFSA’s are a great way to start saving money, and you can do this through the automated approach noted above.  Your money in this account grows tax free and is readily available if you need it in the future for large purchases, and without tax implications.   We will discuss TFSA’s in a future post in further detail.  But for now – START!!

Saving your money is the second step in getting a handle on your financial situation.  Work on putting these tips in place for yourself, and we’ll see you next week to discuss Part 3 in your journey.