As with every aspect of your life, having specific goals keeps you motivated. Even if you don’t reach them all, you’ll at least be on the right path.
Everyone wants more money, but how much is enough?
Achieving financial freedom is the ultimate goal for many people. Still, there are some milestones you can reach in the meantime.
Right now, you may be financially dependent (that is, depend on others to pay off your debts) or just solvent (being able to cover current debt payments and basic living expenses, like rent, food or clothes). If so, your first goal should be reaching financial stability—that is, eliminating all consumer debt and creating an emergency fund.
You could then think about the next milestones, like financial security, which happens when your passive income, or your savings, could cover your basic living expenses for the rest of your life. When you’re financially secure, losing your job won’t leave you in desperation.
After that, we have financial independence. In this state, your passive income or your overall savings could cover your current lifestyle. If you lose your job, the quality of your life won’t worsen.
Last but not least, financial freedom happens when your passive income, or your savings, could cover your ideal lifestyle—that is, you can do whatever you want for the rest of your life. This is the Holy Grail of financial goals.
Of course, it’s tough to reach financial freedom within a year. But if you take one step at a time, anything can happen.
So, what’s your milestone for this year?