11 Steps to Achieve Financial Freedom at Any Income Level

For many people, achieving financial freedom is the ultimate dream.

Financial freedom means being able to choose how you spend your time. It means you can decide whether or not to work.

You could travel the world or be a homebody. Your closet could be full of designer shoes or you could spend every weekend backpacking – or both.

Ultimately, financial freedom means you have enough money saved to support the lifestyle you choose, whatever that looks like for you.

11 Steps to Achieving Financial Freedom

Having the means to live life on your terms may seem like a pipe dream. However, there are a few time-tested steps you can take to make financial freedom your reality.

1. Define financial freedom for you

Financial freedom looks different for everyone. Some people don’t need millions of dollars saved to live their ideal lifestyle. Others might want to have a specific net worth or amount of passive income before they would ever consider themselves financially free.

In order to achieve financial freedom, you have to define what it looks like for you. The first step is to create your vision of financial freedom. What’s your why? In other words, what’s your purpose for wanting to become financially free?

Does your financially free future involve working part-time, full-time, or not at all? Does financial freedom mean traveling extensively or spending quiet days reading on the couch? Write down the answers to these questions, and decide what your version of financial freedom looks like. Once you have these answers, you can start creating your financial freedom plan.

2. Set financial goals

Now that you know what financial freedom looks like for you, it’s time to lay out the path to get from where you are now to where you want to be. Part of that means setting your financial goals.

If your idea of financial freedom means never working again, how much money do you need to retire? Once you know that number, what’s your timeline for getting there and how will you do it?

Will you create passive income through real estate investing? Start and grow an online business? Work your way up the corporate ladder and invest the majority of your salary?

There are many ways to retire early. Choose the path that makes the most sense for you, then write out your plan for making it happen.

3. Learn your net worth

Now that you know your exact financial goal, it’s time to calculate your net worth and see how close you are to reaching it.

Net worth is calculated by subtracting your liabilities (what you owe in the form of debt) from your assets (what you own that has value, such as cash, investments, property, etc.). You can save everything you make, but if your net worth isn’t increasing, then you’re not getting closer to your goal.

If math isn’t your forte, or if you prefer not to spend the time doing this calculation yourself, you can use a free online tool such as Personal Capital to do the job for you. Personal Capital links to your accounts and tracks your liabilities and assets in real-time. It also tracks your spending and generates an overview so you can see exactly where your money is going.

4. Track your expenses

Now that you’ve set your financial goals, the best way to reach them is to track your expenses. Tracking your expenses allows you to see where your money is going and shows you areas where your spending could improve.

The most important thing to notice is how your spending aligns with your goals. Are you spending money on things that don’t make a huge difference in your quality of life when you could be putting that money toward your goal of achieving financial freedom?

Budgeting apps like Personal Capital make tracking your expenses less time-intensive than using a spreadsheet or pen and paper. To get started, you’ll need to create a free Personal Capital account. Then sync your bank account to the app. Your transactions will be imported automatically and displayed in easy-to-read graphs and charts.

5. Make a budget

Some people don’t like the word budget. But when you have a big goal like financial freedom, a budget is a crucial part of achieving that goal.

In order to make a budget, create a list of all of your monthly income and expenses. You can also include line items in your budget like fun or entertainment. If you don’t know how much to allocate to each category, look back at your last few months of bank statements to see what you normally spend.

Once you analyze your spending and track your expenses, you should be well on your way to maintaining a budget that can help you reach your ultimate financial goal.

6. Spend consciously

Once you know your goals, ask yourself if your current spending reflects those values and goals. If not, strive to spend more consciously so that you can pursue a life free from financial worries.

7. Create a debt payoff plan

High-interest debt will hold you back from building wealth and increasing your net worth. Therefore, one of the first steps toward reaching your goal of financial freedom is to make a plan to pay off your most expensive debts. Some popular debt payoff plans include the snowball method or the avalanche method.

The first step is typically to stop accruing high-interest debt. Then, take on your debts one at a time and work hard to reduce them.

There are two main ways to work toward your debt payoff goal. First, you can look for ways to save money, like doing a no-spend challenge, eating out less often, or trading in your car for an older model.

The other option is to look for ways to make more money. You could drive for Uber in the evenings and weekends, pick up some freelance clients writing or doing virtual assistant work, or sell some things around your house you no longer use.

Most people focus on only one side of the equation. However, the fastest way to reach your goals is to attack it from both ends. Look for the easiest ways to save money without drastically changing your lifestyle, then focus on growing your income.

8. Plan for short-term savings

A big part of achieving financial freedom is having the savings to cover both small and large expenses. You can plan for short-term savings using something called sinking funds.

Sinking funds are for expenses that are outside of your normal monthly budget. This might include paying for car insurance every six months or your property taxes once a year. Another popular use for sinking funds is a car repair envelope, especially if you drive a high-mileage vehicle. You can also start a sinking fund for holiday savings.

Sinking funds helps stabilize your budget by planning for irregular expenses. That way you don’t have to go further into debt whenever these expenses come around.

9. Increase your income

You can only cut your spending so much. That’s why increasing your income is one of the best moves you can make to achieve true financial freedom.

If you are a salaried employee, be sure to negotiate your pay before you’re hired and also throughout your career. Remember, you don’t have to wait for your yearly annual review for your boss to give you a 5% raise. Instead, you can ask for one at any time.

Collect evidence to show why you’ve earned a raise. Keep track of your most valuable contributions to the company, including ideas you’ve brought to life and emails from satisfied clients.

If you want to further prove that you’re worth more money, you can learn new skills on the side, volunteer for additional responsibilities, and attend training to improve your skillset. If you reach a ceiling with your current employer, don’t be afraid to branch out and start looking for opportunities elsewhere.

There are also endless opportunities to make money in addition to your regular job. You can use the skills you’ve gained working for your employer to take on freelance clients or choose from countless side hustles, like delivering groceries with Instacart or tutoring online.

Related: 42 Ways to Make Money Fast When You Need It

10. Grow your money

Now that you have a strong handle on managing your finances day to day, it’s time to learn how to grow your money. That means learning how to start investing, even if you’re a beginner.

You can do this by reading personal finance books, delving into investing blogs, and experimenting with small amounts of money and investing apps.

Over time, you’ll learn some of the basic investing terms, how compound interest works, and the difference between mutual funds and ETFs. This will help you to grow your hard-earned money over time. Keep in mind that investing in the market is more of a long-term approach to building wealth, not a get-rich-quick tactic.

11. Continue learning

Lastly, when it comes to pursuing financial freedom, knowledge is power. Keep reading and learning as much as possible.

There are many books about personal finance (budgeting, investing, earning more, starting businesses, etc.) out there. Take the time to invest in yourself and gain as much knowledge as possible about these topics. That way, you not only achieve financial freedom but you also learn how to maintain it and grow it along the way.

In addition to reading, one of the best ways to continue your education is to find a good mentor. Look for someone who’s done what you want to do — whether that’s building passive income through real estate investing or creating and scaling a multi-million dollar business — and learn from them. Listen to their advice and do as they say. Surrounding yourself with these kinds of people will have a profound impact on your own success.

Financial Freedom is Worth the Work

Many people dream of financial freedom, but not everyone is willing to put in the work to get there. However, if you do your research, spend time educating yourself about the process, and work hard, it’s absolutely possible.

It’s comforting to know that with financial freedom, you could quit your job at any time and be able to support yourself. There will certainly be moments when budgeting and paying down debt can be difficult or stressful. However, all of that pain is worth it in the end when you finally become financially free.