Where Do You Start?

So, you’ve finally decided to take your financial future seriously. You’re ready for higher income, lower expenses, more time…but wait…where do you start? How can you start your journey towards financial freedom?

There are four main areas to prioritize when evaluating your financial health: income, expenses, assets, and liabilities. Let’s start with income.

Money makes the world go round, right? We rely on money to provide our basic necessities like shelter, food, water, clothes, and transportation. The first step in evaluating your financial health is to evaluate your income and be ready to make a change. How much income you have can dictate many of your life decisions. Are you living at home with your family because you genuinely enjoy their company or because you can’t afford to live on your own? Do you take the bus every morning because it’s more convenient or because you can’t afford a car?

If your income is not supporting the lifestyle you want to live, then do something about it! Sometimes in life, we tend to get complacent. Whether you decide to go back to school, get a certification, apply to a new job, or move to a city with more job opportunities, deciding to make a change is the first step to financial freedom. Everyone’s life and skills are different so there’s no one size fits all solution. Evaluate changes that fit your lifestyle and income stream.

What if you’ve already thought about all the ways you can make money and you’re stuck? There just doesn’t seem to be any way to increase your income. Well that leads us to step 2: evaluate your expenses. One of the best ways to increase your income is to lower your expenses. Of course, your income won’t literally increase, but with less expenses you’ll have more of your income available. How many streaming services are you subscribed to that you don’t watch? Should you get a brand-new car or a used car to save on car payments? What about lavish shopping trips and daily Starbucks stops? What are the things in your life that you are willing to let go?

Financial freedom doesn’t necessarily mean having more money. A millionaire with a million dollars’ worth of expenses can still potentially be living paycheck to paycheck. Are you struggling to survive or are you struggling to maintain an unnecessarily lavish lifestyle? Consider reconciling your monthly spending. It may not seem like you spend a lot of money on food until you review your bank statement and quantify just how much money you’ve spent on happy hours, brunches, and dinner dates. It may not seem like you spend a lot of money on clothes until you add up all the money you’ve spent on clothes in the past month. Review a month’s worth of expenses and gain a better understanding of exactly where all your money is going every month. What you find might just surprise you.

Okay, so now you’ve picked up an extra shift at work, you’ve cancelled some streaming services, and deleted the Uber Eats app, but now what? Small changes like that won’t necessarily make you financially free, but they will start you on the path towards financial freedom. That brings us to step 3: invest in yourself. An asset is anything that is owned or controlled to produce value. Invest in items that produce long term wealth and value. For example, a new home, a certification, stocks, and even cars are all items that can produce value. Money should work for YOU and provide YOU value, not the other way around.

Lastly, when was the last time you evaluated your debt? Are you still paying off your credit card from over 10 years ago? How much student loans do you still have?  Do you even know your current interest rates? Liabilities (most people refer to it simply as debt) are future sacrifices of economic benefits that you are obligated to make to other people or entities as a result of past transactions. Is your car with a $10,000 loan really an asset or another liability?  What about that house you worked so hard for? Paying down debt is one of the most important steps to financial freedom.

Many who know me know that I’m a huge opponent of student loans. How can you reach financial freedom when you owe Fannie Mae thousands of dollars in student loans? And just when you think you’re almost done paying the student loans, you purchase a car and a home, and next thing you know, you’re spending your whole life paying off debt and desperately trying to maintain a lifestyle you can’t afford.

That’s why I started Pachira Financials. I want others to know, especially those in disenfranchised communities, that financial freedom is available to you no matter what your situation is. Follow me on this journey as we delve deeper into these topics and much, much more.