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How to Reach Financial Freedom in Canada

We all have dreams to live a financially free life. No debt, savings compounding in interest, an emergency fund for those unexpected occurrences – we all want this for ourselves.

A 2019 survey shows that Canadians are increasingly facing financial hardships and are struggling to manage their debt. These financial hardships can put a lot of stress on you and play a big part in your mental health.

But there is a way to be financially free from living paycheck to paycheck. If you put in the time and follow these steps, you’ll be one step closer to living your best life.

What is Financial Freedom?

Financial freedom is the concept of being smart with your money. Instead of you working for your money, your money will work for you. And on top of this, you will be prepared for any emergency.

By controlling your spending and having a positive cash flow, you can reach financial freedom, along with investing and smart saving.

How can You be Financially Free?

You can achieve financial freedom by staying motivated and setting personal finance goals. For example, if you aim to be financially free by the age of 40 and retired by 50, you need to make time to work on a plan of action and sticking to your plan.

You can reach financial freedom sooner rather than later by putting in the work and following these six useful tips.

#1: Keep Track of Your Spending

You must spend less than what you make. Take the time each month to create a budget so that you can see where your money is going. By tracking your revenue and expenses, you can plan to stick to your budget and not spend unnecessarily.

To make a budget, list all your income and expenses and allocate the minimum payment to each expense. A budget needs to be done every month and requires time. If you’re sharing expenses with someone, set a date for each month to analyze your finances and work out your budget for the next month.

A budget should also be zero-based, meaning every penny gets allocated to something. If you’re afraid of overspending, consider using the envelope method, where you assign an envelope for each category on your budget. Working with the envelope method, along with a monthly budget, will keep you on track.

#2: Pay off Your Debt

Everyone wants to live a debt-free life. Whether it’s credit cards, car loans, mortgages, we all want to get rid of these expenses as quickly as possible. Getting rid of debt frees up money that can get used for saving and investing instead.

You first need a plan to repay your debt. Make a list of everything you owe and what the minimum payment is for each bill. List them in order from the smallest amount to the largest amount. Whenever you have extra money, whether it be $10 or $100, pay it into the smallest debt only. By doing so, you’ll get to pay the bill off quicker.

Once that debt gets paid, you take the amount paid towards it and allocate it to your list’s next debt. Keep doing this until you pay the last debt, which will be the largest amount. This debt-repayment method is also known as the snowball effect.

By allocating extra funds to the smallest debt first, you get to see results quicker. This will give you a chance to celebrate the small wins and keep you motivated.

#3: Cut Back Your Expenses

Look for ways to get through the month without spending money on what’s not an expense. Here are a few ideas:

  • Pack your lunch for work. You’ll be stunned at how much you could save by not ordering takeout for lunch. Making your meals will be healthier, and you get to be creative in the kitchen.
  • Use up the food that’s already in your fridge and pantry. Only buy essential items when you need them. Don’t forget to make a list before you go to the store, and stick to it!
  • Cancel your gym subscription for 30 days. There are many ways to get in a workout for free. Walk to work or the store, get free workouts on YouTube; the opportunities are endless.
  • Download free audiobooks to keep you entertained or have your friends meet you at the local park for a no-cost visit. Explore the city you live in by searching for free events online. You’ll be surprised what you can do for free, and you’ll also get to experience new places and activities you wouldn’t normally do.

Small changes will significantly impact learning money management skills, which will benefit you in the long run.

It’s never too late to learn how you can be smart with your money. One way of doing this is by teaching yourself how to cut down on expenses. Impulse spending is a good place to start, such as cutting down unnecessary groceries or magazine subscriptions.

If you’re looking for a money-saving challenge, try the 30 Days No-Spend Challenge. It’s called a challenge for a reason – you cut all non-essential spending for 30 days! For 30 days, you will avoid all the unnecessaries – no takeout, no paid-for entertainment, no more iced cappuccinos on your way to work, etc.

#4: Boost Your Income

Unfortunately, to reach financial freedom, you can’t only rely on investing, saving, and living a prudent life. You can find yourself in an improved financial position if you can increase your income. It will also help you pay your debt off faster, save more, and invest in the future.

Here are ways you can boost your income:

  • Ask for a raise or promotion at work. Approach your HR department or your employer and ask them if you can get a raise. Worst case scenario? They will say no. If they agree, you will be earning more money every month!
  • If your job allows it, put in extra hours so that you can qualify for overtime.
  • Get a side hustle or second job part-time. Whether you sell unused items on eBay or choose to ride for Uber, or deliver pizzas over a weekend, you can increase your income by earning more. Every penny counts in the long run!
  • If you have extra rooms or space in your house, consider listing it on Airbnb. This is if you don’t mind the occasional stranger in your home! Not only will you meet new people from all walks of life, but you’ll make extra money.

#5: Invest Your Money

You will reach your goals faster if you start investing your money. Your money will work for you by investing in the stock market or putting your money into an interest-bearing savings account.

Try to concentrate on generating a passive income through investments over the long term. If your work provides a retirement plan, don’t hesitate to contribute towards it. Most employers will match your contributions, which will help you save towards retirement quicker.

Investing sets your money up for growth through compound interest. Compound interest is achieved with your interest growing interest. The longer you have your cash in investments, the more your money will grow.

Alternative investment options include investing in index funds or real estate. Don’t keep all your eggs in one basket, and instead diversify your portfolio by choosing various investing methods. Whatever investment you’re interested in, do your research. You never want to miss out on the opportunity of investing, as money makes money!

#6: Save Your Money

You’ll never be financially free if you don’t save your money. You’ll prepare yourself for unforeseen emergencies, such as car repairs, by putting money into an emergency fund.

Don’t forget to save for retirement. One way of doing this is by contributing towards a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA). You’ll be one day closer to financial freedom by saving for retirement. Your golden years will be stress-free, and you’ll be living your best life!

Establish how much you need to retire comfortably and how much you need for emergencies by coming up with a savings strategy. Planning will guide and motivate you to reach your savings goal.

Celebrate Life

We all experience failure, so don’t stop living your life. Spend time with all your loved ones and continue to live in the moment. It’s okay if you slip up as you have tomorrow to try again.

If you have a financially challenging month, assess where you went wrong and look for ways to change your situation. Review the steps provided and go through your goals again. Reflection will help you see the bigger picture and motivate you further to reach your financial freedom goals.

Conclusion

Financial freedom is not impossible. Stay motivated, set personal finance goals, and never give up. Stick to your budget and let your money continue to work for you. Taking the first step is what’s most important.

Financial freedom is a journey, and time and dedication are all you need to reach your dreams.

Come to discuss that topic in our Facebook Group!

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