What is Financial Freedom?

Practical steps on how you can become financially free.

Attaining financial freedom is an objective for most individuals. Financial freedom usually means having enough savings, financial investments, and cash on hand to afford the kind of life we desire for ourselves and our families. It means growing savings that enable us to retire or pursue the career we want without being driven by earning a set salary each year. Financial freedom means our money is working for us rather than the other way around.

How do you become financially free?

To become financially free, you must pay off your consumer debts, build a safety net of savings funds, and create enough passive income through investing or business ownership to pay for your current and expected future living expenses.

We are burdened with increasing debt, monetary emergencies, excessive consumer spending, and other problems that keep us from reaching our most meaningful financial objectives. Such challenges confront everybody, but the following twelve habits can put you on the ideal path to financial wellness.

When money makes money, you’re on your way to financial freedom!

When money makes money, you’re on your way to financial freedom!

Key Points

  • Set life objectives, both large and small, monetary and lifestyle; create a plan for accomplishing those objectives.

  • Budget your funds so that you can cover all your needs; stick to this plan; pay your credit cards in full, so you carry as little debt as possible, and watch your credit.

  • Get a financial consultant and start investing; remain current on tax laws; develop automated contributions through your company’s retirement plan; set up an emergency fund.

  • Live below your means; be frugal when possible; and do not be afraid to ask for or negotiate for better offers.

  • Take care of your personal belongings, since maintenance is more affordable than replacement; but more notably, take care of yourself and remain healthy.

Independent Income or Abundant Assets

Financial freedom means you have enough financial resources to pay for your living expenses and allow you to afford many of your life goals without having to work or otherwise commit any of your time or efforts to generating money. These resources might include one or both of the following.

Independent Income

Independent income means you have a business, government benefits, or other sources of regular payments that do not require you to work (exchange your time for money). If you qualify, social security benefits arrive every month. If you have built a business to the point that you can pull back from day-to-day management, you can receive payments regardless of how much time you put in. If you own a rental property, you receive a rent payment once a month, although property management often requires property maintenance and runs the risk of renting to a tenant who misses one or more payments).

If you have enough independent income to pay for your living expenses and your wants, you are financially free.

Abundant Assets

Assets that help support financial freedom typically include investments in securities, cash in bank accounts, and property of value. To use an asset when building financial freedom, you first need to invest in those assets, usually large amounts of money over a long period of time. For example, most financial planners will tell you that contributing regularly to a 401(K) is critical for your long-term financial stability and security. This can be true for many people, so long as they start investing early (in their 20s, 30s, or even 40s). However, those who wait until their 50s or later to start investing will lack sufficient time to take advantage of the power of compound interest. Their contributions will typically not even double after taking inflation into consideration.

Using assets to build financial freedom can lead to potential problems. Think of it as a balancing act. Using this method to pay for your living expenses and wants, you need to sell an asset to have enough cash for your bills. Troubles can arise if you have problems selling an asset (real estate, for example) fast enough to make the cash available before your bill’s due date. People in such circumstances might be called “cash-poor millionaires.” Their assets might be valued at over $1M, but they can’t access that value fast enough to use.

Another potentially bigger problem happens when you run out of assets to convert into cash before you die. Basically, if you go through all your assets too fast, you will be left with nothing to pay for your bills.

Most financially free households, use a combination of both of these methods. They may receive independent income from social security, from a business, or from dividend-paying securities they have invested in, but they also probably have accumulated enough assets in the stock market and the housing market to provide them financial security, knowing they have plenty to fall back on if necessary.

Life Goals

Jot down how much money (assets and income) you need to pay for the lifestyle you want. Include the year when you want to achieve your goals and whether or for how long you will need to pay for those goals. The more specific your objectives, the more likely you are to make them a reality. Then, count backward to your present age and establish financial mileposts at regular intervals. These might include certain dollar amounts saved or assets acquired.

Budget

Making a month-to-month household spending plan and adhering to it is an important method to guarantee all bills are paid while investments and independent income building are on track. Budgeting your money routinely clarifies your objectives and bolsters your willpower rather than letting yourself fall before the temptation to spend lavishly. Charge cards and high-interest consumer loans present hazards to your wealth-building. For additional guidance on how to budget you can review the 5 essential rules of thumb to follow.

Pay Your Dues and Debts

Student loans, mortgages, and similar loans usually have a much lower rate of interest than credit cards and retail store cards, making them less dangerous to your finances. With credit cards, you might end up amassing thousands of dollars of high-interest debts. Drowning in debt for years is the complete opposite of independence. Debt, after all, insinuates obligation and even bondage, both of which clearly counter the idea of financial freedom.

Save

Pay yourself first. That is a standard recommendation from financial experts. Register for your employer’s retirement plan and make full use of any matching contribution benefit. It is likewise an excellent idea to have an automated deposit from your employer into an emergency fund (or an automated transfer from your checking) that can be tapped for unanticipated expenditures. Additionally, consider an automated contribution to a brokerage for an Individual Retirement Account.

Regardless, keep in mind that the suggested quantity to save is widely debated, and the suitability of such a fund is sometimes even in question given certain circumstances.

Invest

There is nothing much better, and no more tried and true way to grow your cash than through investing. Whether you choose a 401(k) or an IRA, now is the time to do your research and decide which direction you will start. But start! That is the most important step.

Monitor Your Credit

A person’s credit report influences any interest rate related to car, truck, or home loans or refinances as well as credit cards and store cards. It likewise impacts unrelated things, such as car insurance and life insurance premiums. The line of reasoning is that someone who is reckless in their financial routines might also be careless in other areas of life, such as driving and consuming. The reality is that, as a group, individuals with lower credit ratings get into more accidents and submit larger claims to their insurance companies than individuals with higher credit ratings. This does not mean someone with poor credit is a bad driver, just as a male who is 23 years old and not married is not a poor driver. However, he will pay higher monthly premiums because he is young, single, and male. Poor credit is just one of many risk pools insurance companies use when determining your monthly premium.

Bargain

Many Americans are reluctant to negotiate for purchases and services, believing it makes them appear cheap. Many from other countries would recommend Americans conquer this cultural handicap. You might save thousands of dollars each year. Smaller merchants, in particular, tend to be open to negotiation. Purchasing in bulk or with repeated transactions can open the door to good discounts.

Learn What Must be Learned

Stay up-to-date with financial news and events in the stock exchange, and do not be reluctant to adjust your financial investment portfolio accordingly. Knowledge is the very best defense against those who victimize unsophisticated consumers to turn a quick buck. In terms of your credit card, make sure you know your credit limit so you do not overspend. It is your responsibility to stay aware of such details.

Take Care of Your Things

Taking good care of your home and your possessions makes everything from automobiles and lawnmowers to shoes and clothing last longer. Imagine if you did not have to buy clothing and shoes as often as you do. You could hold on to your car longer, spending less in the process. Maintenance is the key to saving money.

Live Below Your Means

Mastering a frugal way of life by having a mindset of living life to the maximum with less is not as difficult as it might seem. Many wealthy individuals lived frugally below earning their abundance. Frugality is not an obstacle or the adoption of a minimalist approach to life, nor is it a call to dumpster diving or to extreme hoarding. Frugality is the wise purchase of important items and the responsible stewardship of such possessions.

Get Expert Advice

Even if you are not yet at a point where you have begun amassing wealth, getting expert financial advice to educate yourself and help make good choices will help you prevent problems. From nonprofit credit counseling agencies to your local county extension specialist to accredited financial counselors, there are plenty of reliable experts available to help you at no cost or for minimal fees.

Stay Healthy

Some companies offer limited sick days, so it is a noteworthy loss of income once those days are used up. Weight problems and ailments lead to skyrocketing insurance premiums, and poor health may require earlier retirement with lower monthly benefits. Taking care of your health will not solve all your cash problems, but it will assist you in developing practical habits that can get you on the course toward financial freedom.

How Will I Know if I’ve Achieved Financial Freedom?

You’ll know you’ve achieved financial freedom when you have enough income streams or assets to cover your basic living expenses, as well as any additional discretionary spending you desire, without having to rely on a traditional job or career. This means you have the freedom to work or not work, pursue your passions and interests, travel, and enjoy life on your own terms.

To determine if you’ve achieved financial freedom, you’ll want to create a comprehensive budget that includes all of your expenses, including housing, food, utilities, transportation, insurance, and discretionary spending. Then, you’ll want to compare your income from all sources, such as investments, rental income, and any part-time work, to your expenses. If your income exceeds your expenses, you may be on the path to achieving financial freedom.

It’s important to note that achieving financial freedom is a journey, not a destination, and it may take time and effort to reach your goals. But with careful planning, disciplined saving and investing, and a willingness to make sacrifices in the short-term, you can achieve financial freedom and live the life you’ve always dreamed of.

Remember, every step you take toward financial freedom is a step in the right direction. Keep up the great work, and don’t be discouraged by setbacks along the way. You can do this!

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Client Credit Report Authorization

You hereby authorize and instruct Debt Reduction Services, Inc. (DRS, dba Money Fit by DRS) and/or its assigned agents to:
  • Obtain and review your credit report, and
  • Request verifications of your income and rental history, and any other information deemed necessary for improving your housing situation (for example, verifying your annual property tax obligations and homeowner’s insurance fees)
Your credit report will be obtained from a credit reporting agency chosen by DRS. You understand and agree that DRS intends to use the credit report evaluate your financial readiness to purchase or rent a home and/or to engage in post-purchase counseling activities and not to grant credit. You understand you may ask any questions pertaining to your credit report. However, while DRS will review the information with you, the company is not able to furnish you with a copy of your credit profile. You hereby authorize DRS to share your information from your credit report and any information that you provided (including any computations and assessments produced) with the entities listed below to help DRS determine your viable financial options.
  • Banks
  • Counseling Agencies
  • Debt Collectors
  • Landlords
  • Lenders
  • Mortgage Servicers
  • Property Management Companies
  • Public Housing Authorities
  • Social Service Agencies
Entities such as mortgage lenders and/or counseling agencies may contact your DRS counselor to evaluate the options for which you may be eligible. In connection with such evaluation, you authorize the credit reporting and/or financial agencies to release information and cooperate with your DRS counselor. No information will be discussed about you with entities not directly involved in your efforts to improve your housing situation. You hereby authorize the release of your information to program monitoring organizations of DRS, including but not limited to, Federal, State, and nonprofit partners for program review, monitoring, auditing, research, and/or oversight purposes. In addition, you authorize DRS to have your credit report pulled two additional times to conduct program evaluations. You also agree to keep DRS informed of any changes in address, telephone number, job status, marital status, or other conditions which may affect your eligibility for a program you have applied for or a counseling service that you are seeking. Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Client Privacy, Data Security, and Client Rights Policy

NOTE: This sheet is to inform new or returning clients about our services, records, fees, and limitations that may affect you as a consumer of our services. This form also discloses how we might release your information to other agencies and/or regulators. If you do not understand a statement, please ask a Debt Reduction Services (DRS) counselor for assistance.

Debt Reduction Services, Inc. (DRS) has put into place policies and procedures to protect the security and confidentiality of your nonpublic personal information. This notice explains our online information practices and how we use and maintain your information to conduct our financial education and credit counseling sessions and to fulfill information and question requests. This privacy policy complies with federal laws and regulations.

To provide our financial education and credit counseling services, we collect nonpublic personal information about you as follows: 1) Information we receive from you, 2) Information about your transactions with us or others, and 3) Information we receive from your creditors or a consumer reporting agency. We do not share this information with outside parties.

We use non-identifying and aggregate information to better design our website and services, but we do not disclose anything that could be used to identify you as an individual.

You hereby authorize DRS, when necessary, to share your nonpublic personal, financial, credit, and any information that you provided (including any computations and assessments produced) with the following entities in order to help DRS provide you with appropriate counseling or guide you to appropriate services: third parties such as government agencies, your lender(s), your creditor(s), and nonprofit housing-related and other financial agencies as permitted by law, including the U.S. Department of Housing and Urban Development.

To prevent unauthorized access, maintain data accuracy, and ensure the correct use of information, we have put in place appropriate physical, electronic, and managerial procedures to safeguard and secure the information we collect online. We limit access to your nonpublic personal information to our employees, contractors and agents who need such access to provide products or services to you or for other legitimate business purposes.

Debt Reduction Services, Inc. complies with the privacy requirements set forth in the HUD housing counseling agency handbook 7610.1 (05/2010), including the sections 2-2 Mc, 3-1 H(2), 3-3, 5-3 F, and Attachment A.5. At all times, we will comply with all additional laws and regulations to which we are subject regarding the collection, use, and disclosure of individually identifiable information.

  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

Please refer to DebtReductionServices.org for details of our services.

  1. Limits: Our services are limited to our normal weekday business hours. We do not provide individual counseling or education services after hours or on weekends, although our education courses are available 24/7.
  2. Fees: We do not charge fees for our financial management counseling and education. However, if you use them, you may have to pay for our Debt Management Program, Student Loan Counseling, Bankruptcy Certificate Services or certain financial education courses (homebuyer education, rental topics, fair housing, predatory lending, and post-purchase-non-delinquency including home maintenance and/or financial management for homeowners).
  3. Records: We maintain records of the services you receive, including notes about your progress or other relevant information to your work with us. You have the right to access and view your records by making a request to your counselor.
  4. Confidentiality: We respect your privacy and offer our services in confidence with the understanding that we may share such information with auditors and government regulators. Certain laws or situations may also lead to disclosing confidential issues, such as those involving potential child abuse or neglect, threats to harm self or others, or court subpoenas.
  5. Refusal of Services: You have the right to refuse services without any penalty or loss.
  6. Disclosure of Policies and Practices: You will be provided our agency disclosure statement.
  7. Sharing of Information: Sometimes we will need to contact other agencies or we may need to share your information, including your records, with other agencies or with regulators. We will do this only if you sign this form that gives us permission except for limited reasons; please see # 5 above for examples of such situations.
  8. Other: You have the right to be treated with respect by our staff, and we expect the same from you in return. We encourage you to always ask questions if something is not clear. We also encouraged you to express your thoughts and advocate throughout our services.

You acknowledge that this authorization will remain in effect for the duration of time that DRS serves as your housing counselor or financial education provider. You also acknowledge that should you wish to terminate this authorization, you will notify DRS in writing.

Disclosure  Statement

NOTE: If you have an impairment, disability, language barrier, or otherwise require an alternative means of completing this form or accessing information about our counseling services, please communicate with your DRS representative about arranging alternative accommodations.

Program Disclosure Form

Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
  • A Debt Management Program (DMP) for consumers struggling to pay their credit cards, collections, medical debts, personal loans, old utility bills, and past-due cell phone accounts;
  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

No Client Obligation

The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).