What does financial freedom look like to you? Have you ever thought about it?
For many of us, entrepreneurship is our way of unlocking that freedom and the key to living the life of our dreams.
Think: generational wealth and leaving a financial legacy for our families, being work-optional or early retirement, traveling to all the places on our bucket lists, being able to spend time with and take care of loved ones, home ownership and a place to call our own, guilt-free spending and the ability to say yes to the things we need AND want. The possibilities are endless.
But, the truth is: financial freedom doesn’t happen overnight. It takes planning, patience, and commitment.
Budgeting is the key to financial success. You need to understand where your hard-earned money is going. Create a zero-based budget, which means that you budget for every single penny of your income. Your budget should include your fixed expenses, debt payments, savings, and variable spending. Tracking your expenses will help you identify spending triggers, habits, and opportunities for improvement.
A significant amount of financial stress comes from being just one emergency or unexpected expense away from losing it all. A fully-funded emergency fund is about 3-6 months of expenses, although some entrepreneurs choose to increase that targeted amount to cover any uncertainties in their business. Having this money in savings will keep you from having to tap into credit cards or other forms of high-interest debt.
When you’re first getting started, start with a target of one month of expenses. Once you’ve reached this goal, you can continue to adjust the goal until you’ve fully saved up your targeted emergency fund. Save your emergency fund in a high-yield savings account to boost your savings. An emergency fund will give you peace of mind, knowing that you can survive the unexpected events that life will inevitably throw at you.
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Not all debt is bad, and some debt may even be necessary for you to take on in certain situations. However, you should make a plan to pay off your high-interest debt, like credit cards. Paying down these types of debt can save you hundreds, even thousands, of dollars in interest payments every month.
Utilize a debt payoff strategy to make a plan for debt payoff. Making extra principal payments will allow you to pay down your debt quicker. Two common debt payoff strategies are the debt snowball and debt avalanche methods. The debt snowball method is when you pay extra on the debt with the smallest balance. Once that debt has been paid off, you roll over the minimum payment of the original debt and any extra towards the next smallest debt. The debt avalanche method is when you make extra payments towards the debt with the highest interest rate. Once that debt has been paid off, you roll over the minimum payment of the original debt plus any extra payments to the next debt with the highest interest rate.
Don’t wait another second. Start investing today, if you aren’t investing already. Time is your friend when it comes to long-term wealth building. Even if you don’t have much to start with, consistently investing, even with a small amount of money, can grow significantly over time.
You have many options for investing: employer-sponsored retirement accounts like 401(k)s, individual retirement accounts (IRAs), real estate, cryptocurrency, the stock market, just to name a few. Make sure you do your research and understand the types of investments that you’re taking on.
There is no one-size-fits-all approach to investing. Each of our portfolios will look different depending on what we are investing our money in, our risk tolerance, and time in the market. You want a diversified portfolio with your money spread across different investments. It’s important here that you make a plan, understand the risks involved, consult with a financial planner if necessary, and stick to the plan especially in times of economic uncertainty.
You are your most valuable asset. Make sure you are pouring into your own cup and taking care of yourself.
Spend time reviewing and understanding your finances, both personally and in your business. Continue to invest in yourself by reading a new self-help book, taking a course, learning a new skill, or expanding your network.
Negotiate your salaries and increase your rates when you can justify your price.
Dont’ sell yourself short. You are worthy of wealth.
Sophia White is the CEO + Founder of The Balanced Budget, LLC. She’s a wife and mom of two toddler boys, living in Connecticut. She has her Bachelor’s Degree in Business Administration and an MBA with a concentration in Management, both from UConn. She has over 12 years of experience working in finance & accounting roles. As a bookkeeper and money coach, she has helped dozens of clients gain control of their financial futures, set big money goals, and create a financial plan that works for them!
Sophia is deeply passionate about helping others feel empowered by their money. She believes that there is no one-size-fits-all approach to finances and entrepreneurship. Her own financial journey has allowed her to pay down over $54K of debt, purchase a dream home, and invest and plan for her family’s future, while not giving up the things that they love and enjoy. She works with women, couples, and entrepreneurs to help them reach their own financial goals!
