6 Steps to Financial Freedom: A Roadmap to a Secure Future

Financial freedom is a goal that many aspire to, yet it often feels out of reach. Contrary to popular belief, achieving financial independence does not require an exceptionally high income or a large inheritance. Instead, it revolves around managing your finances in a way that allows you to comfortably cover your current expenses and prepare for the future. If you feel like financial freedom is beyond your grasp, rest assured—it may be closer than you think.

What Is Financial Freedom?

Financial freedom means having the ability to sustain your lifestyle with little financial worry. “It’s a general state of mind,” says Michael Rusinak, vice president of Financial Solutions at Fidelity. “You get to a point in life where you feel you can cover everything comfortably and confidently. And you feel secure in your future needs.”

The key elements of financial freedom involve having control over your essential expenses—such as housing, food, and utilities—while also ensuring that your income is sufficient to meet these obligations. Importantly, financial freedom does not necessarily correlate with a high salary. Instead, it is about maintaining a sustainable lifestyle that aligns with your financial resources.

To achieve financial independence, consider the following six steps.

1. Understand Your Spending to Build Your Roadmap

One of the fundamental aspects of financial freedom is understanding where your money goes. Budgeting is a simple yet powerful tool that helps you track your spending and ensure that your expenses align with your financial goals.

“Simply understanding where your money is going can help you feel more confident about your finances,” says Rusinak. He personally tracks his monthly spending using a spreadsheet, categorizing expenses such as food, housing, transportation, and utilities.

Today, technology makes tracking expenses even easier. Tools like Fidelity’s spending and planning resources can help you monitor your spending, investments, and debt in one place. By gaining insight into your financial habits, you can make informed decisions to optimize your budget.

2. Right-Size Your Budget

Living within your means is crucial to financial stability. Regardless of how much you earn, consistently overspending can lead to financial stress and insecurity. Developing a budget that reflects your income and financial priorities can help you maintain long-term stability.

If you want to assess your spending habits, consider a no-spend challenge, where you avoid discretionary expenses for a set period to identify areas where you can cut back. Additionally, the 52-week money challenge is a great way to boost savings by setting aside incremental amounts of money each week.

3. Build Your Income

While cutting expenses is important, increasing your income is another powerful way to achieve financial freedom. “The higher your income versus expenses, the more financially secure you’re going to feel,” explains Rusinak.

There are multiple ways to boost your income:

• Start a side hustle: Freelancing, consulting, or starting a small business can provide extra income.
• Advance your career: Pursuing further education or training can open doors to higher-paying opportunities.
• Negotiate your salary: Research industry standards and advocate for fair compensation.

As your income increases, ensure that your savings grow accordingly by allocating a portion of any raises or windfalls toward long-term financial goals.

4. Save for Emergencies and Retirement

Financial security comes from being prepared for both expected and unexpected future expenses. Establishing an emergency fund and saving for retirement are key components of financial freedom.

For emergency savings, start by setting aside $1,000 for essential expenses, then work toward accumulating enough to cover 3–6 months of living costs.

For retirement savings, take advantage of employer-sponsored plans like a 401(k) or 403(b), especially if your employer offers a matching contribution. Fidelity recommends saving at least 15% of your pre-tax salary for retirement, including employer contributions. If you can’t start with 15%, begin with a smaller amount and gradually increase it over time.

5. Choose the Right Accounts for Savings and Investments

Different financial goals require different savings and investment strategies. “Every dollar should have a job,” says Rusinak. Understanding the purpose of your savings can help you determine the best accounts to use.

• Emergency savings: Keep in a high-yield savings account for easy access.
• Retirement savings: Utilize tax-advantaged accounts such as 401(k)s, 403(b)s, and IRAs to maximize growth potential.
• Health savings: Consider an HSA if you have a high-deductible health plan, as contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.
• Education savings: A 529 plan offers tax benefits for educational expenses and allows for investment growth over time.

Selecting the right financial accounts ensures that your money is working efficiently toward your financial goals.

6. Tackle Debt Smartly

Debt management is an essential part of financial freedom. When deciding whether to pay off debt aggressively or invest, consider the interest rate.

Fidelity’s general guideline: If your debt carries an interest rate of 6% or greater, prioritize paying it off before directing additional funds toward investments. However, if your debt has a lower interest rate—such as a mortgage or student loans—you may choose to balance debt repayment with investing.

When considering taking on new debt, carefully evaluate whether it aligns with your financial goals and whether your budget can comfortably support the additional obligation.

The Path to Financial Freedom: Planning on Your Own or with a Professional

Achieving financial freedom is not about making drastic changes overnight but rather about making smart, sustainable financial choices over time. Whether you choose to navigate this journey independently or seek the guidance of a financial professional, having a plan in place can provide the clarity and confidence needed to achieve your goals.

Tools like Fidelity’s financial planning resources can help you create a roadmap to financial security. Working with a financial advisor can also provide personalized strategies tailored to your unique situation.

By following these six steps—understanding your spending, right-sizing your budget, increasing your income, saving for the future, choosing the right accounts, and managing debt—you can take control of your finances and move closer to true financial freedom. It may not happen overnight, but with persistence and discipline, you can build a life of financial confidence and security.