Find Financial Freedom

With 2009 just around the corner, I thought it was time to start thinking about new years resolutions. Now, I don’t smoke, am actually in quite good shape, eat a fairly healthy diet and don’t drink that often – in short, all the obvious resolutions to make, like “quit smoking, drink less, lose weight etc” are all non-starters. So this got me thinking, what other areas of my life can I look for improvements in?

I decided to review my financial goals and my spending habits to see what differences I could make in the coming year that would have a positive effect on my finances and move me close to my financial goals.

My financial goals are quite simple – financial freedom – but what is my definition of financial freedom?

• Own your own home without any mortgage
• Have passive income from a stable source that enables a reasonable standard of living
• Pay off all other debts, including car loans, credit cards, student loans etc

If you can achieve those three targets in life, you will be financially free. Admittedly, if your passive income is at the subsistence level, you might as well keep on working to build this up until it’s at a level that allows you to experience life to the full. Likewise, if you have massive passive income, but a huge mortgage and other debts that swallow up the income, then you need to work on decreasing the liabilities and maintaining or even growing the passive income.

So by reviewing my goals, I came to the conclusion that I needed to give myself a serious talking to, and get myself back on track, financially speaking!

I currently don’t own my own home, I rent, but I do have an investment property. I have debt, and a small amount of passive income. In short, I need to work on all three areas of my financial goals this year.

This is how I will prioritise my goals:

• Increase my earnings from my business
• Reduce the level of consumer debts that I have
• Save up a deposit to buy my own home

The first priority is clearly to increase my income, as this enables the other two goals to be achieved quicker. The other goals, are most likely goals that will take longer than a year to achieve, so I can start them in 2009, but will have to pursue them into 2010 as well.

By looking at where I am now, and reviewing against where I want to be, I’ve been able to clarify my thinking and determine my focus for the coming year. If you don’t do this from time to time, you can simply drift, and this is not good as it can lead to a build up of low level stress that will over time lead to bigger problems. So the best financial new years resolution is to spend time reviewing your situation and setting goals for the coming year and beyond.

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