A 2011 study found that Americans are generally happy when they have a household income of $75,000 (and no happier, really, with more). Yet just because you reach that magic number doesn’t mean you are free from financial stress. On the contrary, as anyone who has ever had to pay student loans or credit card debt will tell you, financial freedom is hard to attain.
Stress can have countless negative effects on your health, including increased risk of heart attack and stroke. We also previously covered how stress can negatively impact your spacial awareness. Thankfully, there are plenty of ways to achieve financial freedom and reduce your health risks.
Here are five steps you can take to begin your journey:
- Set financial goals: If you don’t know the reason you are trying to save money in the first place it is much easier to fall off track. Are you planning to have kids? Are you trying to get rid of all of your debt? Whatever the reasons are, they have to be personal to you so it’s not easy to just drop them.
- Spend less than you make: This can be a hard pill to swallow if you live an active lifestyle, but if you spend more money than your annual salary, you’re always going to find yourself in difficult financial situations. For instance, experts recommend a “28 percent rule,” meaning that your housing costs budget should be no more than 28 percent or less of your pre-tax (gross) income. It is also recommended to spend no more than 10 percent of your gross income on a car.
- Ditch the cards: If there’s one good way to reduce the amount of debt you rack up it’s to stop using credit cards. So what are you waiting for? Break out the scissors, cut up those credit cards, and start using cash for your purchases.
- Start an emergency fund: Life is never without its surprises. It’s impossible to predict when you might need a surgery or you have to fly cross-country for a funeral, so set up an emergency fund so you have a safety net. An emergency fund should cover at least three to six months’ worth of realistic living expenses.
- Save for retirement: Think you are too young to be worrying about retirement? Think again. If your employer offers a 401(k) or something similar, you should be sure to take advantage of it. Only 14 percent of current retirees retired after age 65, and that’s because almost half of them retired unexpectedly. Take care of yourself now so you have enough money to have a stress-free retirement.
These aren’t the only ways to achieve financial freedom, but they are a good start. Feel free to research even more ways to start your journey, including looking into alternative homes to save money on your bills.
Which steps will you take first to get on the road to financial freedom?
Zach Halper is a writer based in Brooklyn, NY. He graduated from Goucher College in Baltimore, Md., in 2009 with a BA in English. He previously worked for The NonProfit Times and Noodle Education.