The goal of many public employees is to attain financial freedom by their early 40’s. For some, it could mean buying a house, for others it means being able to retire by then while for others it could be as simple as living debt-free….but what exactly is financial freedom?
Financial freedom is all about being in control of your finances. It involves having various sources of income than you do expenses or debts and allows you to live the life you want with ease. Here are tips on you how can achieve financial freedom within 5 years.
A CalPATH home loan advisor may also be able to provide some helpful tips (or) recommendations to maximize savings with your mortgage.
Analyze your current financial position and set goals
The only way you can start your journey to financial freedom is if you know where you’re starting from. How much debt are you in? Do you have any savings? How much are your average monthly expenses? Compile a list of all your debts, savings, and investments, and then decide what your current financial position is.
Before setting goals, determine what financial freedom means to you so that they can be as specific as possible. The next step is to break these goals down into milestones which you should monitor periodically to make sure you are on track.
Carry little debt
You could have hundreds of thousands of dollars in the bank but as long as you’re in more debt than you do savings, you can never be financially free. Create a list of all the money you owe, including that of friends and family, then come up with a debt repayment plan.
There are two methods that you could use in paying off debts; avalanche and snowball.1 The snowball method is where you start by paying the small debts first while avalanche focuses on paying off high-interest debts.
Have additional sources of income
Being a public employee awards you some sort of job security, but to achieve your financial goals, the 9 to 5 job won’t be enough. You can either focus on creating active income or passive income streams.
Active income is income from investments in which you have to be actively involved, e.g. holding extra tuition during summer. Passive income on the other hand only requires you to make an initial investment, after which you will be earning regularly with minimal effort, e.g. investing in the stock market.
Only spend what you have to
Never spend money you don’t have and only spend that which you can afford. To help you manage your expenses, create a budget, and stick to it, then learn to differentiate between needs, wants, and luxuries. This will help you cut back on the expenses and channel more money towards the financial freedom plan.
Invest in your future
If you were to be retrenched or retire today, would you have something to fall back to? Set aside money towards your retirement and have your employer deduct the money before it hits your account. While at it, make sure you have an emergency fund in place for the rainy days.
Bonus tip for public employee’s financial freedom
Get a financial adviser when you finally have a decent amount of money set aside. They will educate you on how to better your financial health and help you create a solid investment plan.
About Mountain West Financial and the CalPATH Home Loan Program
Mountain West Financial is the exclusive lender offering CalPATH, the #1 home loan program for Teachers, Police Officers, Firefighters, and other public employees who serve our local California communities.
You may contact our CalPATH Hotline @ 800-310-7577, seven days a week from (8:30 am to 8:00 pm). A CalPATH advisor will be standing by to answer (any & all) questions you may have about the home buying or refinance process.
We look forward to working with you soon!
Joe Moore – Branch Manager
Links to sources used:
- What’s the difference between the ‘snowball’ and the ‘avalanche’ debt repayment methods? – https://www.cnbc.com/select/debt-snowball-vs-debt-avalanche/#:~:text=If%20you’re%20motivated%20by,likely%20motivate%20you%20the%20most.