The Joseph Group

Eight Steps to Financial Freedom

June 18, 2021

To Inform:


When you think of some of your biggest dreams in life, perhaps it’s providing for your family, owning a home, or traveling the world, the financial aspect of it can be overwhelming. You may be asking yourself “Where do I even start? What should I be doing now to ensure that I will be financially prepared for the future?”

While everyone has different goals and priorities when it comes to their finances, we’ve put together the general steps people may take at different points in their lives to feel like they have financial freedom.

One month’s living expenses in a checking account: You may ask, “how do I know what my living expenses are?” Once you’ve built a budget (click here to learn more on why building a budget is so important), you’ll be able to see what your spending habits are. Once you’ve determined how much your fixed costs (mortgage/rent payments, car payments, insurance premiums, utility bills, childcare, etc.) and variable costs (groceries, entertainment, clothing, etc.) are, make sure you have enough in your checking account to cover those everyday expenses for the next month.

Payoff all credit card and high interest debt: Before taking on debt, it is important to ask yourself: “Will this debt help me meet my financial goals or make them more difficult to accomplish?” Not all debt is equal. There is a difference between lower interest debt that helps you meet your financial goals, like a mortgage or student loans, and expensive, high interest debt, like credit cards or personal loans for discretionary purchases, that may make it more difficult to achieve your long-term goals. The next step is to pay off any debt falling into the latter category.

Emergency fund of three to six months expenses in a savings account: The next step is to build a cushion so you are prepared should the unexpected happen – someone loses a job, a medical emergency, the water heater breaks, etc. But how much should you save? The general rule of thumb is to have closer to three months worth of expenses saved for dual income families and up to six months saved for single income families/individuals, but you should ultimately save the amount that makes you feel protected.

Save for major purchases: Do you have any large purchases coming up like buying a home or a car? The next step is to save after-tax dollars in a brokerage account or high-yield savings account to put towards a down payment or outright purchase. Perhaps you know that you may have large expenses coming up at some point, but don’t know exactly when or even what they may be. That is okay, it can still be important to build savings for the unknown – cash is not trash!

Accumulate to meet long-term goals, such as retirement: While you will likely want to start the habit of deferring some funds from your paycheck towards a retirement account early on in your career, you may also have other obligations, like student loans, or need to put more funds towards the items mentioned above, so you may not be able to contribute more than a few percent. However, once you no longer have high interest debt and have enough funds set aside for an emergency or major upcoming expenses, you may want to focus on maximizing your savings for retirement, whether that be through a 401(k), IRA, Roth IRA, or other retirement plan.

College Funding: Is it important to you to help fund your child’s or grandchild’s education? If so, you may wish to start contributing to a 529 account for their benefit. Click here to learn more about the tax benefits 529s allow when used for qualified educational expenses.

Pay off the mortgage: Say goodbye to the monthly mortgage payments! The next step is to pay off any remaining low interest debt, including the mortgage, to become completely debt-free.

Build wealth and a legacy! So, you have an emergency fund, have saved for major expenses, are contributing to your retirement, and are completely debt-free… now what? Now is the time to do what you want to do instead of what you have to do to live. What are you passionate about? Money is not the end goal, rather it is a tool to allow you to pursue your great life. Identify the values that are most important to you and do what you can now to build your legacy.

Everyone’s goals are different and some people may focus on one of the steps above more than the others, and that’s okay! It’s important to always refer back to your specific plan. We love to help our clients think about planning for specific goals and how to achieve them. If you have any questions about which step you should take now, please contact us.





Written by Bridget Head, CFP; Wealth Advisory Associate