Financial freedom is a point where you are debt-free, have ample savings, and have the freedom to decide where your money goes, instead of letting that decision be dictated by debtors. Though financial freedom might look different for everyone, it should be something we all desire.
Unfortunately, the journey to financial freedom is rarely without obstacles. When the going gets tough, do you know what is holding you back?
Here are 10 common challenges that hold individuals back from financial freedom, and how to overcome them.
1) Lack of Knowledge
Without a solid understanding of personal finance and how money actually works, it can be near impossible to find financial freedom. Money doesn’t have to be complicated, but a basic understanding can do you wonders.
Luckily, if you feel like you have room to grow in your knowledge of personal finance, there are endless resources for you. You can read personal finance books, blogs, talk to a financial advisor, or even take classes. Having knowledge about personal finance is the first step to become financially secure.
2) Fear of Commitment
Some people, though they have a good understanding of money, are afraid to commit to trying to gain financial freedom. These people typically live in the now and weigh their desired purchases more important than saving for the future or paying off debt.
There is no way around it. You have to face your fear of commitment head-on. The path to financial freedom is tough, and you will find that the only thing to carry you through sometimes is the commitment you made to yourself and to your family.
When you are faced with a financial temptation, remember the commitment you made to achieving your financial freedom. Sometimes, all you have to do is take a step back and remind yourself of what your priorities are.
3) Poor Prioritization
Speaking of priorities, poor prioritization can be another barrier to financial freedom. Failure to prioritize your finances correctly will lead you to focusing your time and energy on something that isn’t as important.
For example, if you want to find financial freedom, you will have to prioritize paying off debt before you prioritize saving for a trip to Hawaii. If you are in school, you may need to prioritize working instead of becoming involved in as many student organizations.
This isn’t to say that experiences aren’t worth as much. In fact, most personal finance advocates believe that experiences, like vacations, hobbies, and socialization costs are very worthwhile. But those experiences become even more fun when the burden of debt is off your shoulders and you have comfortable savings. Once you are in a good financial position, you’ll find that you can enjoy experiences even more without any of the guilt of the cost.
4) Disorganization
It can be near impossible to achieve financial success without some resemblance of organization. Without organization, it’s difficult to use your money to its full potential. Plus, disorganization leads to an increased chance of forgetting bills, missing payments, and paying late fees.
The simplest thing you can do to get organized is to start a budget in Excel (download our free budget here). You can make a list of all of your expenses and add a note to the side of what day they are due each month.
Everyone has a different organizational method for their finances, but it is important to find what works for you.
5) Too Little Income
Depending on what wealth means for you, you may be content with a smaller salary. But the fastest and easiest way to build wealth is to increase your income.
On a smaller income, you can only do so much to improve your finances. You can budget perfectly, coupon, and save every extra penny. But what would an extra $100 a month do for your finances? What about an extra $500? Or even $1,000?
There are several ways to increase your income. You can ask for a raise at work or find a higher paying job. You can also start a side hustle, like blogging or freelance writing, which allows you to make extra income from the comfort of your own home.
6) Lack of Goals
In order to achieve financial freedom, you will need to spend some time thinking about what that actually means to you, and creating goals based on those thoughts.
It’s important here to have big goals, because you really can achieve them. Having goals will give you the motivation and direction you need when your financial journey gets tough. You always need a reminder of what you are working towards.
7) Not Accepting That You Can Build Wealth
Anyone can build wealth, no matter how bad their financial situation was when they started. Everyone’s vision of wealth is different, but it’s important to remember if you want to be wealthy and you’re willing to work for it, you can be.
There are no excuses that someone else hasn’t already overcome. In fact, some of the wealthiest people have come from very poor backgrounds, but they worked and sacrificed for what they wanted.
No matter your income, how much debt you have, or how many mouths you have to feed, you can build wealth. If you don’t acknowledge that you can be successful, you won’t ever even try.
8) Not Prioritizing Saving for Retirement
When working towards financial freedom, it is easy to become focused on just the now. But true financial freedom is setting yourself up for continued freedom in the future, which is why it’s vital to prioritize saving for retirement.
Retirement can be tricky, because, even though it could be decades away, if you aren’t saving for it now, you are missing out on potentially thousands of dollars in interest. The easiest way to save for retirement is to start now, no matter how little.
Luckily, you can usually set it up to have your retirement contributions deducted automatically from your paycheck, making it an easy way to contribute. How much you save is up to you, but the more, the better. And remember, if your employer offers any sort of match, you should make it your goal to at least contribute enough to get the full match. Otherwise, you are losing out on free money.
9) Failure to Make Even Small Sacrifices
If your financial journey is easy, you probably aren’t doing everything you can to dedicate yourself to your goal of financial freedom. It takes work and sacrifice to get there.
Some people want everything, but they fail to see how their financial decisions now are preventing them from having the future they want. Making sacrifices for what you truly want is always worth it.
For example, if you cancelled cable, you could have enough money for a really nice vacation within a year. If you gave up shopping for 6 months, you could pay hundreds, or even thousands, of dollars extra towards debt. Your daily coffee fix? You could put that cost towards savings instead and have an extra $100 a month.
These are examples of common sacrifices, but it goes to show that the cost of now is rarely as important to us as the cost of the future.
10) Not Even Starting
Lastly, it’s impossible to achieve financial goals if you don’t ever start. Though it can often feel overwhelming to improve finances, the most important step is to just start.
The basic idea of personal finance is that you should spend less than you earn. Though this concept is simple, it truly is an idea you can let drive your financial decisions. With every purchase, consider if it is worth it.
Have any of these obstacles held you back from financial freedom? If not, what has?
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I encountered a number of these myself before I got my act together and it really came down to thinking I couldn’t do/accomplish anything different with my money. I see a lot of this with others as well – sort of the idea that you need to be an expert at money to really do anything. Obviously, that’s not the case. Yes, some areas of money are a bit more complicated but there are so many resources available that provide an adequate level of help to get a good grasp of what to do. You just have to want to find it, in my opinion.
That’s a great point, John, and I would say that I had that thought process as well in my financial journey. Money can be intimidating, but the basics of personal finance is simple addition and subtraction. And the best part is that it’s called personal finance for a reason. It truly is up to individuals to choose how they want to spend their money. Once I had that mindset change, I was able to hold myself more accountable, because I realized my actions were the deciding factor of whether I would be successful financially or not.
Perfectly agree for years I never thought about money budget savings & co, I used my salry for things I wanted so only when I started to have a budget. I paid off my little debt (I’m debt free!) I use savings (a part of ) to buy a new mattress, an investment on healt
That’s great, Giulia! Even though I’ve had debt, it has at least taught me to be much more conscious about my purchases, and spend my money on things that truly matter to me.
Some of those obstacles have held me back before. Number 5 is the reason that I started side hustling. As I get older, I’m learning to make even more sacrifice and focusing on the end goal.
That’s great to hear. I think a lot of people don’t spend time considering what financial freedom actually means. It sounds like something important, but until you really think about what it would look like to spend your money without guilt or the sense of owing someone, it doesn’t always connect. When I actually considered what financial freedom meant to me, I was able to focus my energy so much more effectively.
Personally I found that setting a challenging goal and breaking it down into manageable chunks is the best way to prioritize spending and improve your finances.
For my wife and I we set a goal to pay off our mortgage in five years. This was an extremely challenging goal but we broke it down into 4 month chunks. Every four months we would each save a certain amount. This amount increased over time as we improved our budgeting skills. That gradual increase helped us prioritize our spending over a couple of years. We ended up paying down $240,000 in just 5 years!
Wow! That’s amazing. I do the same with my student loans. Instead of focusing on how much I owe as a whole (which is an overwhelming amount), I focus on each individual loan. Each loan ranges from $2,000-5,000. When I focus on one loan at a time, it really does help my focus and stress levels. You can’t build a ship in a day, and I forget that sometimes with regards to finances.