The Why, What, How Method to Financial Freedom
It took me a few years to become debt free. Years of learning how to budget, testing different methods, changing my spending habits and mindset about money. Through those years of trial and error, I realized that although the journey may not be easy, the process is simple.
To be successful with your finances you have to get clear on three questions.
These three essential questions make up The, Why, What, How Method to Financial Freedom.
1. What Is Your "Why?"
Starting off by figuring out your financial "why" is important because it will be the fuel that will keep you going. Becoming debt-free and sticking to a budget is not easy, but if your "why" is big enough, it will give you the motivation to stick to your plan.
Your "why" can change as your life changes, but it always has to be there. My "why" used to be that I wanted the freedom to be able to pursue my side hustle. Now, it's having the option to work less so I can spend more time with my daughter.
If you need more help and ideas for figuring out your why, visit this blog post which goes more in depth.
2. What Are Your Financial Goals?
After you're clear on your financial "why", the next step in this process is to write down specific and measurable financial goals.
Simply stating "I want to pay off debt" or "I want to save more money" isn't specific enough. If you want to be successful with your financial goals they have to be track-able. Be specific with the amount you need to pay off to become debt-free or how much you want to save and for what reason.
Once you have a list of specific financial goals, prioritize them. Figure out which goals are important for you to focus on. I've found that if I focus on one goal at a time, the progress is more noticeable and keeps me motivated to keep going.
3. How Will You Achieve These Financial Goals?
To go after those financial goals you need a plan for your money. You need to decide where your money is going before you have it. This is where budgeting and the cash envelope system comes in.
Learning how to budget is one of the most important life skills you can have. Once you start telling every dollar where to go, you will notice how much more you can do with your money. If you're new to budgeting, it can seem overwhelming at first but if you keep at it, tweaking your budget every month until it's something you can follow, you will be amazed at the financial goals you can reach.
Using a cash envelope system is also a great way to stick to your budget and become more mindful with your spending. I love the cash envelope system because it keeps my budget simple and easy to follow. Just categorize my cash, spend from the corresponding envelope and when it's gone, it's gone.
If you need more help creating a budget and learning about the cash envelope system check out the blog post on creating a budget.