As the old adage goes, money can’t buy happiness. Study after study has shown that the size of one’s bank account does not necessarily relate to satisfaction with one’s life. At the same time however, financial freedom can contribute to your happiness. Psychology Today’s article on financial well-being spoke to this idea, pointing to security, planning, and contentment — rather than pure wealth — as important factors.
The idea is that having what you need in your own circumstances, and learning not to value “stuff” or money, can lead to a happier life. In theory then, someone making less money but managing it more strategically can be more financially content than someone making more money but focusing solely on income.
With all of that said, however, it all comes down to a little bit more than perspective. Shifting your values and budgeting a little bit more strictly may help, but a more robust strategy is required if you’re to achieve true financial freedom and the happiness that can come with it. So here we’re providing a few essential tips for how you can reach this point.
Focus on Making More Money
The idea of focusing on making more money sounds obvious. Indeed, it sounds like what we all do as we embark on careers and work toward advancement. When you really think about it though, it’s likely that you’ll discover your approach to upping your income to be somewhat passive. Most of us do our jobs, fulfil expectations, and hope for progress along the way. But by focusing on making more money, rather than just getting the job done or furthering your career, you may find that you actually advance more quickly.
Our ‘7 Steps to Make More Money’ provide a number of ideas that you can use to start shifting your focus. Whether it means asking for a promotion, starting a side hustle, or even learning a skill that will enable you to switch jobs, you can begin to prioritize higher income today.
Layer Your Savings
Savings are somewhat like income, in that most people assume they’re doing all they can — until they really think about it. You may have money put away in an account or two, where you expect it to appreciate over time. This can certainly work, but the returns can be more or less negligible, and there are more strategic ways to save that can actually result in something closer to passive income.
One option in this regard is to move money from a traditional savings account into a high-yield account, or a Certificate of Deposit. This is something far too few people are doing, and it results in an unnecessary loss of financial opportunity. Business Insider identified 75% of Americans as not investing in high-yield savings accounts, and described this as “leaving free money on the table” — which is an appropriate way to put it. The accounts are somewhat different, however. Some high-yield accounts and CDs operate just like regular savings accounts, but for the fact that they hold money for predetermined lengths of time, and they offer greater returns. So, by agreeing to leave money in an account for a while, you can guarantee a greater yield when you pull it out.
This may not sound particularly beneficial, but there’s a way to turn it into something that really is more like a side stream of income. An article about CD ladders by Marcus explains the idea, which is basically to set up multiple CDs at once, with different maturity dates. That way, you can stagger them such that you’re frequently withdrawing money — which, having grown with interest, can then be spread out into additional CDs, and so on. This is only one example of how you can expand savings, but it shows that you can improve your financial standing by moving money into more strategic accounts and arrangements.
Set Long-Term Goals
The idea of setting long-term goals may sound fairly ordinary in the context of personal financial management. However, we’d suggest you take a moment and think about the last time you considered needing money for something. Now — was it something serious or casual??
For a lot of people, a lot of the time, the answer is casual. We often consider something we might like to buy, be it a nice meal at a favorite restaurant, a new article of clothing from a popular store, or anything similar. There’s certainly nothing wrong with these things, nor is there any problem with budgeting for them. But when you’re really looking to improve your financial standing, it’s more important to do some careful consideration of long-term goals that are particularly important to where you want your life to go.
What those goals are can depend entirely on your wants, needs, and ambitions. Maybe you feel you need to travel once a year to stay happy; maybe you’re planning to attend graduate school, or you know already that you’d like to have a certain kind of wedding. Perhaps you even have a year in mind at which you’d like to retire. Whatever the case, having these specific, long-term goals in mind can help to inform your financial decision-making, lending more purpose to your strategies.
Address Your Debts
Addressing debt is another important step in achieving financial freedom. Often enough, debt can become something of a nagging problem that people try not to think about. This is understandable, but it’s not proactive, and it hangs an unnecessary financial burden on your shoulders. So instead, think about finding ways to address your debts more quickly.
This is easier said than done; most people can’t simply come up with the money they need to wipe out debt, or they’d have done so already. However, even some small adjustments can help. A look at debt strategies by NPR had one that we like in particular, which is to try a “spending fast,” wherein you reduce your spending as much as you possibly can for a period of time, and put the money instead toward your debts. You might be surprised how much of a difference this can make even in a few weeks — and how much closer you might get to ridding yourself of debt.
Ultimately, all of these tips are about making and saving more money. By taking these suggestions to heart, you may find that you have more wealth at your disposal, and that you do a better job of maintaining it and helping it grow. Remember though that this isn’t about generating that wealth just for the sake of doing so. In the end, it’s meant to allow you to address your needs and establish the security you need to focus on other things that bring you joy.
AUTHOR BIO: Annie Govan is a freelance writer based in Michigan. Her writing covers a variety of topics relating to finance, business, and lifestyle.