By Michael Yardney October 20, 2023

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How do I ever achieve financial freedom?

Money & You
How do I ever achieve financial freedom?

Do you know that all-too-familiar fear that comes with receiving a monthly bill?

Do you open it with trepidation, not knowing if your budget (or lack thereof) will allow for easy, pain-free payment… or will you have to scrounge and save to find the money on time?

If this feeling sounds familiar, you’re definitely not alone.

According to the Australian Bureau of Statistics, one-third of Australian households were "over-indebted."

The most common types of debts include the ubiquitous credit cards and student loans.

And of course home loans - which are not really bad debt because it is secured against an appreciating asset

Note: Even though it may seem like you’re the only Aussie in dire straits financially, you’re not the only one who is suffering when it comes to hanging on to your cash.

If you’re hoping to stress less about money and focus more on the good things in life, our 5 steps to reaching, and maintaining your financial freedom might be a step in the right direction…

Step 1: Work out how to manage your money better

When you lack a proper budget and tend to live from pay to pay, throwing money around without forethought, you’ll struggle to get ahead.

The best way to ensure you’re on track to building your wealth is to give every single dollar a place to go before you receive your paycheque.

Go through your weekly, fortnightly and monthly expenses and write down everything you have outgoing.

This should include things like mortgage payments or rent, groceries, utilities, phone and internet, and all other living expenses.

Start tracking where your money is going, and give yourself a personal audit.

Are you spending wisely?

How much are you spending on Uber Eats compared to the money you’re stashing into savings?

Be brutal with yourself.

It can be so tempting to ignore financial issues, but the longer you ignore them, the more damage they cause.

Step 2: Do a Financial Spring Clean

Okay, now that you are taking steps to manage your money better, your next step is to do a financial spring clean.

This means tidying up all the loose ends, including any outstanding debt you have – big or small.

If you’ve got personal loans, a car loan or a credit card debt, now is the time to get serious about paying it off.

One of the most effective ways to quickly and effectively handle any debt is to use the Domino effect, where you start with your smallest debt and continually pay that off until it’s gone.

From there, you move on to your second-smallest debt.

Tips: Focus on paying that off until it’s gone and the account closed, and then continue to move through your list.

This is a great way to knock out small, pesky loans and also achieve a sense of pride and satisfaction that you can use as motivation to continue paying debt off.

After all, even paying off a $500 credit card debt is a successful accomplishment!

Step 3: Choose careers wisely

When you’re looking to build wealth, you need to know where your money is coming from, how much is coming, and how frequently.

This is where your income takes front and centre stage.

Note: Unfortunately, the reality is that you may not be able to build lasting, substantial wealth if you’re in a dead-end job with poor pay and no career trajectory.

So at this step, you need to consider whether you’re on the right career path.

How can you figure that out?

By thinking about things like job security, the potential to increase your pay, employee benefits, and – most importantly – job satisfaction.

If the work you’re doing now isn’t making you happy and won’t help you get to where you plan on being in 10 years time, it’s best to review your prospects and consider a career change.

Step 4: Set up a short-term savings strategy

Now it’s time to build your buffer!

This is the small amount of savings you need to build up ASAP, to handle things like a dentist appointment, car repairs, broken appliances, any unexpected medical expenses or any of a number of other curveballs that life can throw at us.

Tips: Your emergency nest egg should ideally be able to cover around 3-6 months of your living expenses.

That may seem like a tall order, but the best way to begin building this is by throwing small, frequent payments towards it.

Once you’ve got the stability and security that your emergency savings fund should give you, you can start focusing on really building your wealth!

Step 5: Investments? Maybe…

There are many viable investment options that will cater to your individual circumstances, once you’re ready to start the process of building wealth and creating financial security.

Some solid strategies include investing in shares, index funds, exchange-traded funds, term deposits, or real estate.

However, you can’t get started in any of these investments until you have your financial foundations under control.

Tips: If the idea of investing (or anything mentioned in this article) makes you nervous, consider finding a financial advisor who can assist in setting you up with some long-term strategies and investments that will work away in the background of your life, slowly but surely solidifying your financial situation and building up your wealth.

To summarise:

Now where your money is going - formulate a budget
Spend less than you earn
Trap that surplus income and save it until you have a big enough amount to
Invest in income-producing growth assets like residential real estate
Rinse and repeat

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.